Financial Crime World

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AML/CFW Compliance Woes: Countries Struggle to Meet International Standards

March 2004 - A review of countries’ efforts to combat money laundering and terrorist financing (ML/TF) has revealed a mixed bag of compliance with international standards. The Financial Action Task Force (FATF), an intergovernmental organization, assessed the implementation of anti-money laundering and combating the financing of terrorism (AML/CFT) measures in 40 countries from 2004 to 2011.

Results

The study found that while some countries have made significant progress in implementing AML/CFT measures, others have struggled to meet international standards. The results show:

  • Partially compliant: 25.5%
  • Largely compliant: 35.6%
  • Non-compliant: 24.9%

Key Findings

One of the key findings is that elements of the standard that have been in place longer tend to have higher compliance ratings. For example:

  • The AML Recommendations, which have been in place since 1990, had a higher degree of compliance (45%) compared to
  • The CFT Special Recommendations, which were introduced in October 2001, with a compliance rate of 31.5%

Areas for Improvement

The study also highlighted areas where countries struggle to meet international standards, including:

  • Designated non-financial businesses and professions: averaging just 12.1%
  • Recommendations concerning the criminalization of ML/TF: relatively high at 45.1%, but legal measures are not sufficiently harmonized with international standards

Weaknesses in AML/CFT Systems

The report also identified weaknesses in the functioning of AML/CFT systems, including:

  • Inadequate customer identification policies
  • Poor transparency of legal persons and arrangements
  • International cooperation: a bright spot, with countries showing a degree of compliance at 56.3% on applicable recommendations

Conclusion

The study’s findings highlight the challenges faced by countries in implementing effective AML/CFT measures. While some progress has been made, much work remains to be done to ensure that these systems are functioning effectively and that countries are able to detect and prevent ML/TF activities.

Countries’ Compliance Ratings

  • AML Recommendations: 45%
  • CFT Special Recommendations: 31.5%
  • Designated non-financial businesses and professions: 12.1%
  • Criminalization of ML/TF: 45.1%
  • Customer due diligence measures in financial institutions: 22.1%
  • International cooperation: 56.3%

The full report can be found on the FATF website.