Financial Crime World

Global Financial Systems: Assessing Compliance with Anti-Money Laundering and Combating the Financing of Terrorism

Low Compliance Rates Despite Progress

A recent analysis by international financial authorities has revealed that countries’ compliance with anti-money laundering (AML) and combating the financing of terrorism (CFT) measures remains low, despite significant progress in many areas. The assessment reviewed the AML/CFT regimes of 161 countries between 2004 and 2011 and found that only a small percentage of countries have achieved full compliance with international standards.

Areas for Improvement

  • Legislation and Institutions: While most countries have enacted legislation and established government institutions to combat money laundering and terrorist financing, many struggle to ensure that these systems function effectively on an ongoing basis.
  • Harmonization: The lack of harmonization between national laws and international standards creates confusion and gaps in coverage. Key conventions are often not fully transposed into domestic legislation.

Progress Made

  • Criminalization: Criminalizing money laundering and terrorist financing is a significant step forward, but many countries still fail to provide adequate resources for financial intelligence units (FIUs) and regulatory authorities.
  • Financial Intelligence Units: Establishing strong FIUs is an important step in combating money laundering and terrorist financing. However, many countries still lack the necessary resources to effectively supervise financial institutions.

Challenges Remain

  • Customer Identification Policies: Weak customer identification policies allow money launderers and terrorists to access financial systems through financial institutions, designated non-financial businesses and professions (DNFBPs), and the informal sector.
  • Transparency of Legal Persons and Arrangements: Many countries struggle to provide transparency of legal persons and arrangements, which hampers efforts to prevent money laundering and terrorist financing.

International Cooperation

  • Mutual Legal Assistance: Most countries have adequate provisions for mutual legal assistance, information sharing, and cooperation both domestically and cross-border.
  • Information Sharing: However, many countries still struggle to provide transparency of legal persons and arrangements, which hampers efforts to prevent money laundering and terrorist financing.

Conclusion

While some progress has been made in strengthening AML/CFT regimes, much work remains to be done to ensure that they are effective in preventing and detecting money laundering and terrorist financing.