FATF Standards Related to Money Value Transfer

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FATF Standards Related to Money / Value Transfer
APEC ARS Initiative SymposiumShaping the
Remittances Markets by Shifting to Formal
Systems Tokyo, 3 June 2004
Vincent SCHMOLLPrincipal AdministratorFATF
Secretariat
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Financial Action Task Force

• Created in 1989 by Group of Seven
• Mission Establish anti-money laundering
  standards
• Legal, law enforcement and financial sector
  measures
• Since 2001, new role Setting / interpreting
  standards for combating the financing of
  terrorism
• Major part of work Assessing compliance with
  AML/CFT standards
• Key component of effort Studying methods and
  techniques of money laundering and terrorist
  financing

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FATF Standards

• FATF Forty Recommendations (1990 2003)
• Eight Special Recommendations on TF (2001)
• Interpretative Notes
• Best Practices
• Other guidance (assessment Methodology)
• Objective Protection of the world-wide
  financial system from misuse by organised crime
  and by terrorist financiers

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FATF Standard on MVTSpecial Recommendation VI

• SR VI Alternative Remittance (October 2001)
• Interpretative Note to SR VI (February 2003)
• Best Practices Paper for SR VI (June 2003)
• Methodology for Assessing Compliance (February
  2004)

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Objective of SR VI

• Increase the transparency of payment flows by
  ensuring that consistent AML/CFT measures apply
  to all forms of money / value transfer (MVT)
  systems, particularly those operating in whole or
  in part outside the conventional financial sector.

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SR VI Interpretative Note Core elements
identified

• MVT services should be licensed or registered
• MVT services should be subject to applicable FATF
  Recommendations (R. 4-11, 13-15, 21-23, and SR
  VII)
• Jurisdictions should establish systems to monitor
  MVT compliance with FATF standards
• Jurisdictions should be able to impose sanctions
  on MVT services for non-compliance

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SR VI Best Practices Paper More details on
implementation

• Licensing or registration
• Identification and awareness raising
• Anti-money laundering regulations
• Customer identification
• Record keeping requirement
• Suspicious transaction reporting
• Compliance monitoring
• Sanctions

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SR VI Methodology Criteria for assessing
compliance

• License or register MVTs maintain list
• Apply FATF Recommendations (4-11, 13-15, 21-23,
  and SR VII)
• Monitor compliance with Recommendations
• MVTs should maintain list of agents
• Sanctions for non-compliance
• Other measures from Best Practices Paper

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Challenges in Implementing SR VI

• Difference in objectives of approaches
• 1 Objective Absorb MVT into conventional system?
• 2 Objective Maintain MVT under a separate
  regime?
• Licensing vs registration MVT operation based
  on
• Authority granted by State
• Simple declaration of MVT service
• Should the implementation be seen as an evolving
  process? (MVTs under a separate regime at first
  but gradually absorbed into conventional system)

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Challenges (continued)

• However, must still ensure consistency of
  application
• Nationally ensure level playing field
• Internationally avoid becoming weak link
• Important to examine role of other factors
• Degree of development of financial sector
• Differences between economies
• Potential use of economic incentives to encourage
  development and use of conventional systems

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Ultimate Objective

• Protect all parts of the financial system from
  criminal / terrorist misuse.
• Thus, focus should be on increasing transparency
  to ensure that
• Records on transactions and customers exist.
• Such records are available to competent
  authorities.
• Other benefits of strengthened financial sector

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For further information

• FATF Website www.fatf-gafi.org
• Vincent SCHMOLL Principal AdministratorFATF
  SecretariatE-mail Vincent.Schmoll_at_fatf-gafi.org