The comity of nations is becoming more serious in respect of anti-money laundering and terrorist financing. Financial Action Task Force has been established to review the progress made by individual countries. How the progress is evaluated these are criteria to evaluate. These criteria require many actions to be taken by individual government. This article examines these criteria. Let us now look that what an individual nation is required to do in this regard.
Criteria for the nations evaluation of AML/compliance regime:
(i) Criteria approved by FATF, FinCEN, IMF and World Bank
1. Has the money-laundering been criminalized1 in domestic law?
2. Does the country's law provide that the crime of money laundering be applied to all serious offences, with a view to include the widest range of predicate offences?2
3. Does the country's domestic law provide liability on offender in respect of intent and knowledge to prove the offence of money laundering?3
4. Does the domestic law provide criminal liability, and, where that is not possible, civil or administrative liability?4
5. Does the domestic law provide legal authority to apply measures set forth in the Vienna and Palermo Conventions?5
6. Does the domestic law provide to Identify, trace and evaluate crime property?6
7. Does the country's financial institutions stand directed not to keep anonymous accounts or accounts in obviously fictitious names?7
8. Does the financial regulations of the country provide for financial institutions to undertake customer due diligence measures, including identifying and verifying the identity of their customers?8
9. Does the country's financial institutions verify the identity of the customer and beneficial owner?9
10. Does the country's financial institution perform normal due diligence measures in relation to politically exposed persons?10
11. Does the country provide for normal due diligence measures in relation to cross-border correspondent banking, and other similar relationships?11
12. Does the financial institution of the country pay special attention, to money laundering threats arising from technologies that provides for anonymity?12
13. Does the country permit its financial institutions to rely on intermediaries or other third parties to perform the CDD process in order to meet the required criteria?13
14. Does the country's financial institution maintain, all necessary records on transactions, both domestic or international, to enable them to comply with information requests from the competent authority?14
15. Does the country made it compulsory to have the CDD, and record-keeping requirements particularly for:
a) Casinos
b) Real estate agents
c) Dealers in precious metals and dealers in precious stones
d) Lawyers, notaries, other independent legal professionals and accountants
e) Trust and company service providers?15
16. Does the law provide for reporting of suspicious activities to country's FIU to trace funds related to the proceeds of a criminal activity, or to terrorist financing?16
17. Does the law protect the directors, officers and employees of financial institution from criminal and civil liability for any breach of law or disclosure of information?17
18. Did the domestic financial institutions develop programs to counter money laundering and terrorist financing?18
19. Did the domestic law provide for effective sanctions, (whether criminal, civil or administrative), to deal with natural or legal persons?19
20. Does the country prohibit the establishment or acceptance of the operations of shell banks?20
21. Does the country's banks and other financial institutions and intermediaries report all domestic and international currency transactions above a fixed limit, to a national central agency having a computerised data base?21
22. Does the country apply FATF recommendations to businesses and professions, that pose a money-laundering or terrorist-financing risk?22
23. Does the country's financial institutions (including their foreign branches and subsidiaries) give special attention to business relationships and transactions with persons, companies and financial institutions from countries which do not apply the FATF Recommendations?23
24. Are there adequate domestic regulations and supervision mechanism to effectively implement the FATF recommendations?24
25. Does the country regulates and supervises:
a) Casinos
b) Other categories of designated non-financial businesses and professions?25
26. Does the country assist financial institutions and designated non-financial businesses and professions to apply measures to combat money laundering and terrorist financing?26
27. Has the country established FIU that serves as a national centre for receiving, analysing and disseminating of STR and other information relating to money-laundering or terrorist-financing?27
28. Does the domestic law enforce regulations relating to investigations in respect of money-laundering and terrorist-financing?28
29. Does the domestic competent authorities stand authorised to obtain documents and information for use in investigations?29
30. Do the domestic supervisors have adequate powers to monitor and ensure compliance (by financial institutions) of the requirements to combat money-laundering and terrorist-financing?30
31. Has the country provided for adequate financial, human and technical resources to their competent authorities involved in combating money-laundering?31
32. Does the country's domestic law provide for the establishment of FIU?32
33. Can the country's authorities review the effectiveness of their systems to combat money-laundering and terrorist-financing?33
34. Does the domestic law prevent unlawful use of legal persons for money-launderers?34
35. Does the domestic law provide measures to prevent the unlawful use of legal arrangements by money-launderers?35
36. Have the steps been taken by the country to become party to implement fully the Vienna Convention, the Palermo Convention, and the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism?36
37. Does the country provide mutual legal assistance in respect of money-laundering and terrorist-financing investigations, prosecutions, and related proceedings?37
38. Does the country render legal assistance in respect of these crimes?38 39. Does their exist an authority to respond to the requests by foreign countries to identify, freeze, seize and confiscate property laundered, proceeds from money-laundering or predicate offences?39
40. Does the country recognise money-laundering as an extraditable offence?40
41. Does the domestic authorities been allowed to maintain co-operation with their foreign counterparts?41
42. Has the country reviewed its development issues?42
43. Has the country allowed IMF/World Bank to analyse its financial soundness indicators?43
44. Does the country's central bank compile indicators to measure the financial markets?44
45. Has the country carried out assessments of the observance of standards and codes?45
46. Has the country reviewed corporate governance of both state-owned and private financial institutions?46
47. Has the country upgraded bank supervision and bank's risk management?47
48. Has the country an effective AML/CFT legal and regulatory framework?48
49. Is there any weaknesses in the country's framework to resolve troubled financial institutions?49
50. Does the laws and judicial system exist in respect of loan recovery and property rights enforcement?50
51. Does the financial markets provide services to the full range of customers?51
52. Does the country's insurance companies implement anti-money laundering programme?52
53. Does the financial institutions engage in currency transactions relating to international narcotics trafficking?53
54. Has the country implemented KYC requirements?54
55. Des the domestic law provides for STR requirements?55
56. Does the country prosecute money laundering offenders?56
57. Does the country or institution equipped to provide adequate training in AML/CTF.56A
(ii) Risk-based approach requirements:
58. Does the country's institutions have understanding of AML/CTF compliance requirement and are they responding to the threats and vulnerabilities as a national risk assessment?57
59. Does the country has a legal/regulatory framework that supports the application of a risk-based approach?58
60. Does the country has framework to support the application of the risk-based approach?59
61. Does the country's law provides for identifying the main actors and ensure consistency?60
(iii) Requirements under Council for Europe Convention
62. Does the country's AML/CTF framework provides for information exchange between the public and private sectors?61
63. Has the country taken necessary measures to enable it to confiscate offending instrumentalities and proceeds or property's the value of which corresponds to such proceeds?62
64. Has the country taken such legislative and other measures as may be necessary to enable it to identify and trace property which is liable to confiscation?63
65. Has the country taken legislative and other measures to empower its courts or other competent authorities to order that bank, financial or commercial records be made available or be seized in order to carry out AML/CTF investigations?64
66. Has the country taken legislative and other measures to enable it to use special investigative techniques facilitating the identification and tracing of offending proceeds and the gathering of evidence related thereto.65
(iv) Requirements under 1988 UN Convention
67. Has the country made the following offences cognisable under its domestic law?
(i) The acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from a money laundering or drug related;66
(ii) The possession of specified equipment or materials or substances knowing that they are being or are to be used in or for the illicit cultivation, production or manufacture of narcotic drugs or psychotropic substances;67
(iii) Publicly inciting or inducing others, by any means, to commit specified offences established for, use in narcotic drugs or psychotropic substances illicitly;68
(iv) Participation in, association or conspiracy to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the offences specified?69
(v) Requirements under Palermo Convention
68. Has the country taken legislative and other necessary measures to establish criminal offence, when committed intentionally?70
69. Has the country taken such legislative and other measures to establish the following as criminal offences?
a) Attempting to commit a transitional offence;
b) Participating as an accomplice in the said offence;
c) Organising or directing other persons to commit the said offence?71
70. Has the country established comprehensive policies, programmes and other measures?
a) To prevent and combat trafficking in persons; and
b) To protect victims of trafficking in persons, especially women and children, from re-victimisation.
c) To provide or strengthen training for law enforcement, immigration?72
71. Has the country taken legislative and other measures to establish as criminal offences, (when committed intentionally) in respect of the smuggling of migrants?73
72. Has the country criminalized the following acts when committed intentionally?
a) Illicit manufacturing of firearms, their parts and components and ammunition;
b) Illicit trafficking in firearms, their parts and components and ammunition;
c) Falsifying or illicitly obliterating, removing or altering the marking(s) on firearms required by article 8 of this Protocol?74
73. Does the domestic legal systems, enables confiscation of firearms, their parts and components and ammunition that have been illicitly manufactured or trafficked?75
74. Does the domestic legal system, prevents illicitly manufactured and trafficked firearms, parts and components and ammunition from falling into the hands of unauthorised persons by seizing and destroying such firearms, their parts and components and ammunition unless other disposal has been officially authorized?76
75. Does the country maintain an effective system of export and import licensing or authorisation, as well as of measures on international transit, for the transfer of firearms, their parts and components and ammunition?77
1. FATF 40 Recommendation: 2003. The basis for criminalizing are available in UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988.
2. Id. Predicate offences may be described by reference to all offences, or to a threshold linked either to a category of serious offences or to the penalty of imprisonment applicable to the predicate offence.
3. Including legislative measures, to enable their competent authorities to confiscate property laundered, proceeds from money laundering or predicate offences, instrumentalities used in or intended for use in the commission of these offences, or property of corresponding value, without prejudicing the rights of bona fide third parties. The standards in this regard stand set in the Vienna and Palermo Conventions.
4. Id.
5. Id.
6. Id. Property which is subject to confiscation, freezing and seizing of assets, recovery of property.
7. Id.
8. Id.
9. The domestic regulations must permit financial institutions to complete the verification.
10. These include risk management, approval of senior management, for establishing business relationship, tracing the source of wealth and doing EDD.
11. Id.
12. Id.
13. Id. The criteria requires maintenance of accounts and related records for five years, and to pay special attention to complex, unusual large transactions and their record keeping.
14. Id.
15. Id.
16. Id.
17. Id.
18. Id.
19. Id.
20. Financial institutions should refuse to enter into, or continue, a correspondent banking relationship with shell banks. Financial institutions should also guard against establishing relations with respondent foreign financial institutions that permit their accounts to be used by shell banks.
21. Id.
22. Id.
23. Id.
24. Id.
25. Id.
26. Id. In particular, in detecting and reporting suspicious transactions.
27. Id.
28. Id.
29. Id.
30. Id.
31. Id.
32. Id.
32. Id.
33. Id.
34. Id.
35. Id.
36. Id. Countries are also encouraged to ratify and to implement other relevant international conventions, including the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the 2002 Inter-American Convention against Terrorism.
37. Id.
38. Id.
39. Id.
40. Each country should either extradite its own nationals, or where a country does not do so solely on the grounds of nationality, that country should, at the request of the country seeking extradition, submit the case without undue delay to its competent authorities for the purpose of prosecution of the offences set forth in the request.
41. Id.
42. IMF/World Bank FSAP review dated 22.2.2005.
43. Id. n.42.
44. Id. n.42: This includes to review efficiency, quality, reach and breadth including laws and regulation of financial markets.
45. Id. n.42.
46. Id. n.42.
47. Id. n.42.
48. Id. n.42.
49. Id. n.42.
50. Id.
51. Id.
52. New FinCEN Regulations: Legal works: Electronic Banking Law and Commerce Report, December 2005, volume 10, No 7.
53. Id. n.53.
54. Id. n.53.
55. Id. n.53.
56. Id. n.53.
56A. Id.
57. FATF RBA Guidance for dealers in precious metal and stones: 17 June 2008.
58. Id.
59. Id.
60. Id.
61. Id.
62. Council for Europe Convention on Laundering, Search, Seizure and Confiscation at the Proceeds from Crime dated 8.11.1990.
63. Id.
64. Id.
65. Id.
66. Article 3(1) C(i) of UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988.
67. Article 3(1)C(ii) Id.
68. Article 3(1)(iii) Id.
69. Article 3(1)C(iv) Id.
70. Article 3, Annex II of the Protocol to the UN Convention against Transition Organised Crime.
71. Article 8 of the Palermo Convention.
72. Id. Article 6 of the Protocol to the UN Convention against Transition Organised Crime.
73. Id. Article 7 of the Protocol to the UN Convention against Transition Organised Crime.
74. Id. Article 5 of the Protocol to the UN Convention against Transition Organised Crime.
75. Id. Article 6 (1) of the Protocol to the UN Convention against Transition Organised Crime.
76. Id. Article 6 (2) of the Protocol to the UN Convention against Transition Organised Crime.
77. Id. Article 10 of the Protocol to the UN Convention against Transition Organised Crime.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates)