Dialogue with the Private Sector
Brussels, 26-27 March 2015 – The FATF has concluded a two-day meeting of the Private Sector Consultative Forum in Brussels, Belgium. The meeting was hosted by the European Payment Institutions Federation (EPIF). The main objectives of the meetings were to:
- discuss recent developments related to terrorism and terrorist financing risks
- exchange views on “de-risking”
- seek input and feedback into ongoing FATF work on the risk-based approach
- hear about innovations in the financial services sector, and
- discuss other issues of concern or interest to the private sector relating to the implementation of anti-money laundering (AML) and counter-terrorist financing (CFT) measures, in line with the FATF Recommendations.
Over 160 participants representing the financial sector and other businesses and professions subject to AML/CFT requirements, civil society, and representatives of FATF members and observers attended the meeting. The FATF welcomed the open exchange of views and received useful input from the private sector on the following important issues.
Recent developments related to terrorism and terrorist financing risks
Given the increasing number of terrorist attacks, the FATF has moved terrorist financing to the top of the FATF agenda. The FATF recently published a typologies report on Financing of the Terrorist Organisation Islamic State in Iraq and the Levant, which has raised awareness of these serious issues in both the public and private sector. Targeted financial sanctions are an important means for combatting terrorist financing and the United Nations recently launched a consolidated sanctions list which is publicly available and will be a useful tool in this area. Going forward, the FATF will focus on countries’ implementation of measures to combat terrorist financing and will undertake further typologies work in this area.
An exchange of views on “de-risking”
The FATF reiterated its position on “de-risking” and the need for financial institutions and other designated businesses and professions to undertake proper implementation of the risk-based approach. Views on the drivers and scale of this issue vary considerably and the problem is not well understood. The FATF invited the Forum participants to share any statistics that they may have which would help to shed further light on the scale of this complex issue. It was also clarified that the FATF standards do not require a “know-your-customer’s-customer” (KYCC) approach to conducting customer due diligence.
The risk-based approach
The FATF sought feedback on its work to revise the existing FATF Guidance on the Risk-Based Approach for Money Services Businesses. These revisions will bring the existing FATF guidance into line with the revised FATF Recommendations which were adopted in February 2012. These discussions were a key step to developing a common understanding of the risk-based approach, how it applies both to private sector stakeholders and supervisors, and the particular challenges of managing agent networks. The FATF also had discussions with representatives from virtual currency providers on its work to develop risk-based approach guidance for that sector.
Innovations in the financial services sector
The participants heard about emerging technological and business innovations in providing financial services through mobile and internet-based payments, including their impact on financial inclusion and AML/CFT risk management for financial institutions.
Important developments since the last meeting of the Forum
Since last year’s meeting of the Private Sector Consultative Forum, the FATF has completed the following guidance papers and typologies reports which are of particular relevance to the private sector:
- Guidance on Transparency and Beneficial Ownership
- Guidance on the Risk-Based Approach for the Banking Sector
- Financial flows linked to the production and trafficking of Afghan opiates
- Risk of terrorist abuse in non-profit organisations, and
- Virtual Currencies: Key Definitions and Potential AML/CFT Risk.
New country assessments
The FATF has also completed the first four mutual evaluation reports of the 4th round: Australia, Belgium, Norway and Spain. These reports provide an in-depth assessment of the effectiveness of each country’s AML/CFT system and level of technical compliance with the FATF Recommendations.
The Private Sector Consultative Forum plays a crucial role in fostering effective implementation of the FATF Recommendations by bringing together representatives of sectors which are subject to AML/CFT requirements (financial institutions and other designated businesses and professions), civil society, and policy makers to discuss issues of common interest. The FATF reiterates its commitment to continuing engagement with the private sector, and recognises the value that such dialogue brings to the work of the FATF.