On March 12, 2014, the Executive Board of the International Monetary Fund (IMF) reviewed recent developments in anti-money laundering and combating the financing of terrorism (AML/CFT), and discussed proposals for the Fund's future Strategy on AML/CFT.
For more than a decade, the Fund has made important contributions to international efforts to fight money laundering and terrorist financing. Originally, the Fund's AML/CFT program focused primarily on AML/CFT assessments - as part of the Reports on the Observance of Standards and Codes (ROSC) program and of the Financial Sector Assessment Program (FSAP) - and capacity development activities. More recently, AML/CFT issues have also been increasingly included in other areas of Fund work, namely surveillance and Fund-supported programs.
The basis for AML/CFT assessments has recently changed: the Financial Action Task Force (FATF, the standard setter for AML/CFT) revised the AML/CFT standard in 2012 and adopted a common assessment methodology and procedures in 2013. The FATF also took important steps to strengthen the quality and consistency of future assessments. It adopted stronger quality controls for its own assessments, ensured that comparable measures are adopted by the FATF Style Regional Bodies (FSRBs), and established an ex post review mechanism to address sub-quality reports.
Under current policy, every FSAP should be associated with an AML/CFT assessment conducted approximately every five years, and, to the extent possible, within 18 months before or after the relevant FSAP mission. This framework was intended to provide an effective mechanism for addressing AML/CFT issues in the FSAP on a consistent basis, but despite coordination attempts with the FATF/FSRBs, it has not always been possible to align the FATF/FSRB assessments with the FSAP schedule and to provide useful input into the FSAP. In these circumstances, Directors discussed ways of ensuring the incorporation of timely and meaningful AML/CFT information into the FSAPs. Directors also discussed the impact of these developments on Fund work, including under the current burden sharing agreement, whereby assessment reports prepared by the FATF and the FSRBs are converted into ROSCs.
Executive Directors welcomed the opportunity to review the Fund's strategy on AML/CFT. They agreed that the Fund's work has significantly contributed to the international community's response to money laundering and the financing of terrorism, and encouraged continued cooperation in this area with the World Bank, the Financial Action Task Force (FATF) and the FATF-Style Regional Bodies (FSRBs). Directors also highlighted the important role played by the Fund in capacity building efforts in member countries on AML/CFT.
Directors welcomed the 2012 revision of the AML/CFT standard by FATF and the recent update of the assessment methodology, in particular the greater attention to risks and country context, which should result in more focused and meaningful assessments. They therefore endorsed the revised FATF standard and the new assessment methodology for the Fund's operational work.
Directors noted that deficiencies in a country's AML/CFT regime can have important implications for macroeconomic and financial stability. They therefore broadly supported the direction taken by staff in including financial integrity issues in Article IV consultations and Fund-supported programs. Directors encouraged staff to continue its efforts to integrate AML/CFT issues into its surveillance and in the context of Fund-supported programs when financial integrity issues are critical to financing assurances or to achieve program objectives. Some Directors emphasized the need for evenhandedness in the coverage of these issues in surveillance and Fund programs.
Directors reaffirmed that AML/CFT assessments are an important part of the ROSC and FSAP programs, and stressed the importance of ensuring adequate quality of assessment reports across the range of assessor bodies. They noted that, with the expansion of the FATF and FSRBs network in recent years, the Fund has increasingly drawn upon the FATF/FSRBs assessments for the purposes of its own work, in application of the burden sharing arrangements between the international financial institutions and the FATF/FSRBs. In this respect, Directors welcomed the steps taken by the FATF to strengthen quality and consistency controls for future assessment reports and looked forward to all assessor bodies implementing similar controls. They encouraged staff to participate actively in the review mechanisms, as resources permit.
A number of Directors supported, or were open to, the staff's proposal to limit the conversion of FATF/FSRB assessments into ROSCs to the FSAP context where the assessments have undergone a satisfactory quality and consistency review and are not clearly deficient. However, many other Directors, representing a majority of the Board, preferred to continue converting all assessments into ROSCs, underscoring that the FATF's strengthened controls will ensure that these reports meet the requisite quality standards. In light of this, the current system of converting all assessments into ROSCs following a pro forma review will be maintained.
Directors stressed the importance of timely and accurate AML/CFT input into every FSAP. They agreed that, where possible, this input should be based on a comprehensive quality AML/CFT assessment and, in due course, on targeted updates/ROSCs, in line with the approach taken under other standards and codes. To facilitate this, Directors encouraged continued efforts by all assessor bodies to align their assessment schedules with the FSAPs. They also noted that, consistent with the general policy, staff would, if necessary, supplement the information derived from the ROSCs to ensure the accuracy of AML/CFT input. In addition, they recognized that there may be instances where comprehensive assessments or targeted updates against the prevailing standard will not be available. Directors generally agreed that, in these instances, staff may need to derive key findings on the basis of other sources of information.
Directors noted the resource implications of (i) the increased inclusion of AML/CFT issues in surveillance and in Fund-supported programs, (ii) the assessments under the revised methodology, and (iii) staff's participation in the strengthened quality and consistency controls. In light of the overall budget situation, most Directors considered it appropriate for staff to reduce the number of Fund-led comprehensive assessments to two or three per year.
Directors noted that the next review of the AML/CFT program would be expected to be completed within the next four years.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings …
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