Revised FATF Recommendations

The long awaited revised FATF Recommendations on International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation was finally published on 16 February. Following several rounds of consultation the revised Recommendations contain no real surprises in the publishes outcome, but a lot of disappointment has been aired by various groups who feel that the FATF has not gone far enough to tackle corruption and tax evasion despite the FATF’s best intentions.

Serious tax crimes have now been added to the list of predicate offences. The smuggling offence has also been clarified to include offences relating to customs and excise duties and taxes. These changes mean that financial institutions and other regulated business types need to be on the lookout for suspected tax evasion by their clients. This was an area of concern during the consultation phase as many felt that the many, if not most, private sector regulated businesses  lacked the requisite expertise to detect tax crimes and that the playing field remains far from level creating an inequality and further burden for businesses faced with the task of digging out possible criminality. Whereas many countries did not may tax crime a reportable offence, all countries will now need to ensure that tax crimes are included in their anti-money laundering legislation to track down the proceeds of fiscal offences.

Another area of contention surrounds the identification of beneficial ownership. Despite the intention of clarifying and simplifying the requirement to identify ultimate beneficial owners (UBOs) the corporate veil remains. The new requirements for nominee directors and shareholders to disclose their status to the company registry, or be licensed, will start to reduce the risks in relation to the camouflaging of ownership.

The FATF have finally included domestic politicians in their definition of PEPs removing what was a somewhat ridiculous anomaly. The focus has increased globally with the risk of corruption high on the agenda of the G20. Non-conviction based asset forfeiture now also features on the agenda.

The former nine Special Recommendations on Terrorist Financing are now incorporated into the main 40 Recommendations reflecting the close connection between terrorist financing and anti-money laundering measures. A new addition of proliferation financing has been added to assess countries’ compliance with targeted financial sanctions of UN Security Council Resolutions that focus on the financing of proliferation activities, specifically targeting Iran and North Korea.

The revised standards are a first step and countries now need to implement their recommendations into law with the new standards being incorporated into evaluations by February 2013. In the UK we would expect the fourth European Directive in be in place by this date, followed closely by our own revised Money Laundering Regulations.

The long awaited revised FATF Recommendations on International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation was finally published on 16 February. Following several rounds of consultation the revised Recommendations contain no real surprises in the publishes outcome, but a lot of disappointment has been aired by various groups who feel that the FATF has not gone far enough to tackle corruption and tax evasion despite the FATF’s best intentions.

Serious tax crimes have now been added to the list of predicate offences. The smuggling offence has also been clarified to include offences relating to customs and excise duties and taxes. These changes mean that financial institutions and other regulated business types need to be on the lookout for suspected tax evasion by their clients. This was an area of concern during the consultation phase as many felt that the many, if not most, private sector regulated businesses  lacked the requisite expertise to detect tax crimes and that the playing field remains far from level creating an inequality and further burden for businesses faced with the task of digging out possible criminality. Whereas many countries did not may tax crime a reportable offence, all countries will now need to ensure that tax crimes are included in their anti-money laundering legislation to track down the proceeds of fiscal offences.

Another area of contention surrounds the identification of beneficial ownership. Despite the intention of clarifying and simplifying the requirement to identify ultimate beneficial owners (UBOs) the corporate veil remains. The new requirements for nominee directors and shareholders to disclose their status to the company registry, or be licensed, will start to reduce the risks in relation to the camouflaging of ownership.

The FATF have finally included domestic politicians in their definition of PEPs removing what was a somewhat ridiculous anomaly. The focus has increased globally with the risk of corruption high on the agenda of the G20. Non-conviction based asset forfeiture now also features on the agenda.

The former nine Special Recommendations on Terrorist Financing are now incorporated into the main 40 Recommendations reflecting the close connection between terrorist financing and anti-money laundering measures. A new addition of proliferation financing has been added to assess countries’ compliance with targeted financial sanctions of UN Security Council Resolutions that focus on the financing of proliferation activities, specifically targeting Iran and North Korea.

The revised standards are a first step and countries now need to implement their recommendations into law with the new standards being incorporated into evaluations by February 2013. In the UK we would expect the fourth European Directive in be in place by this date, followed closely by our own revised Money Laundering Regulations.

You must be logged in to post a comment.