FINANCIAL ACTION TASK FORCE

GROUPE D’ACTION FINANCIÈRE

The FATF Recommendations on

Combating Money Laundering
and the Financing of Terrorism
& Proliferation

FATF Secretariat
13-Nov-12 1
 The Money Laundering Problem

. UNODC (2011) estimates scale of criminal

proceeds and money laundering:
– Criminal proceeds: 3.6% of global GDP
($2.1 trillion in 2009)
– Money laundering: 2.7% of global GDP
($1.6 trillion in 2009)

– Some estimates see tax evasion as a further

2% of global GDP.
13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 2
www.fatf-gafi.org
 Why use financial measures?

. Up to 70% of crime is estimated to be

acquisitive
. Anti Money Laundering (AML) measures can:
– Detect criminals through their financial activity;
– Deter criminals by confiscating proceeds of crime;
– Disrupt terrorists by undermining their finances;
– Protect the financial system from illicit funds.

13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 3

www.fatf-gafi.org
 The Financial Action Task Force

. Created in 1989 as a Task Force

. Mandate to:
– Set standards to combat Money laundering and
the Financing of Terrorism & WMD Proliferation;
– Assess compliance with the FATF standards;
– Identify & respond to threats to the integrity of
the international financial system.
. Next round of peer-review assessments to
begin in January 2014, focusing on
effectiveness.
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www.fatf-gafi.org
 FATF Members
• 34 Member Jurisdictions
• 2 Regional organisations
• 22 Observer organisations
 FATF Global Network
. Eight FATF-Style Regional Bodies
. Total membership: 187 Countries
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation

13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 7

www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

– National Co-operation and Co-ordination
– Risk Assessment & Risk-based approach added in 2012
. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation

13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 8

www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
– Criminalise money-laundering
– Confiscation of criminal proceeds
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation

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www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
– 2012 Recommendations require predicate offences to include
Tax Crimes
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation

13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 10

www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
– Criminalise terrorist financing
– Implement targeted financial sanctions (asset freezing)
– Oversight of non-profit organisations
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation

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www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
– 2012 Recommendations add targeted financial sanctions
against the Financing of Proliferation
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation

13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 12

www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
. Preventive Measures (by financial institutions and others)
– Customer Due Diligence
– Suspicious Transaction Reporting
– 2012 Recommendations add new requirements for domestic
Politically Exposed Persons
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation
13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 13
www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
– Transparency of beneficial ownership of companies
– Transparency of beneficial ownership of trusts
– 2012 Recommendations strengthen transparency
requirements and place new controls on e.g. bearer shares
. Powers of competent authorities
. International co-operation
13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 14
www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
– Regulation and supervision of financial institutions
– Powers and responsibilities of law enforcement
– Financial Intelligence Unit
. International co-operation

13-Nov-12 FINANCIAL ACTION TASK FORCE | GROUPE D’ACTION FINANCIÈRE 15

www.fatf-gafi.org
 Key themes of the FATF Standard

. Policies and Co-ordination

. Money Laundering and Confiscation
. Terrorist and Proliferation Financing
. Preventive Measures
. Legal persons and arrangements
. Powers of competent authorities
. International co-operation
– Mutual Legal Assistance & Extradition
– Freezing and Confiscation of Assets
– 2012 Recommendations remove obstacles and strengthen
practical requirements for cooperation.

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www.fatf-gafi.org
 Anti-money laundering and
counter- terrorist financing
(AML/CFT) measures in Pakistan
Fourth Round Mutual
Evaluation
Ratings
October 2019
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-Pakistan-2019.html

Anti-money laundering and counter-terrorist financing measures in Pakistan - Mutual Evaluation Report - October 2019 1
7
 Ratings – Effectiveness
(1/3)
Immediate outcome of an effective system to combat Extent to
money laundering (ML) and terrorist financing (TF) which
Pakistan has
achieved
this
objective
1. ML and TF risks are understood and, where Low
appropriate, actions co-ordinated domestically to
combat ML and TF
2. International co-operation delivers appropriate information, Moderate
financial intelligence, and evidence, and facilitates action
against criminals and their assets
3. Supervisors appropriately supervise, monitor and regulate Low
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
4. Financial institutions and DNFBPs adequately apply AML/CFT Low
preventive measures commensurate with their risks, and
report
Anti-money suspicious
laundering transactions.
and counter-terrorist financing measures in Pakistan - Mutual Evaluation Report - October 2019 1
8
 Ratings – Effectiveness
(2/3)
Immediate outcome of an effective system to combat Extent to
money laundering (ML) and terrorist financing (TF) which
Pakistan has
achieved
this
objective
5. Legal persons and arrangements are prevented from Low
misuse for money laundering or terrorist financing, and
information on their beneficial ownership is available to
competent authorities without impediments
6. Financial intelligence and all other relevant information Low
are appropriately used by competent authorities for
money laundering and terrorist financing investigations.
7. Money laundering offences and activities are investigated Low
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
8. Proceeds and instrumentalities of crime are confiscated. Low

Anti-money laundering and counter-terrorist financing measures in Pakistan - Mutual Evaluation Report - October 2019 1
9
 Ratings – Effectiveness
(3/3)
Immediate outcome of an effective system to combat Extent to
money laundering (ML) and terrorist financing (TF) which
Pakistan has
achieved
this
objective
9. Terrorist financing offences and activities are investigated Low
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive
sanctions.
10. Terrorists, terrorist organisations and terrorist financiers are Low
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
11. Persons and entities involved in the proliferation of Low
weapons of mass destruction are prevented from raising,
moving and using funds, consistent with the relevant
United Nations Security Council Resolutions.

Anti-money laundering and counter-terrorist financing measures in Pakistan - Mutual Evaluation Report - October 2019 2
0
 Ratings –
Effectiveness

Anti-money laundering and counter-terrorist financing measures in Pakistan - Mutual Evaluation Report - October 2019 2
1
 Ratings – technical
compliance
(1/5)
AML/CFT POLICIES AND
COORDINATION
1. Assessing risks & applying a risk-based a Partially Compliant
approach
2. National cooperation and Largely Compliant
coordination
MONEY LAUNDERING AND
CONFISCATION
3. Money laundering Largely Compliant
offence
4. Confiscation and provisional Largely Compliant
measures
TERRORIST FINANCING AND FINANCING OF
PROLIFERATION
5. Terrorist financing Largely Compliant
offence
6. Targeted financial sanctions related to terrorism &
terrorist
financing a Partially Compliant
7. Targeted financial sanctions related to a Partially Compliant
proliferation
8. Non-profit a Partially Compliant
organisations

22
 Ratings – technical
compliance
(2/5)
PREVENTIVE
MEASURES
9. Financial institution secrecy Complian
laws
Customer due diligence and record t
keeping
10. Customer due Partially Compliant
diligence
11. Record Largely Compliant
keeping
Additional measures for specific customers and
activities
12. Politically exposed Partially Compliant
persons
13. Correspondent Largely Compliant
banking
14. Money or value transfer Partially Compliant
services
15. New a Partially Compliant
technologies
16. Wire Largely Compliant
transfers

23
 Ratings – technical
compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial
Groups
17. Reliance on third Partially Compliant
parties
18. Internal controls and foreign branches and Partially Compliant
subsidiaries
19. Higher-risk Partially Compliant
countries
Reporting of suspicious
transactions
20. Reporting of suspicious Partially Compliant
transactions
21. Tipping-off and Partially Compliant
confidentiality
Designated non-financial Businesses and Professions
(DNFBPs)
22. DNFBPs: Customer due Non
diligence
23. DNFBPs: Other a Compliant
Partially Compliant
measures

24
 Ratings – technical
compliance
TRANSPARENCY(4/5) AND BENEFICIAL OWNERSHIP OF
LEGAL PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal a Partially Compliant
persons
25. Transparency and beneficial ownership of legal Non
arrangements
POWERS AND RESPONSIBILITIES OF COMPETENT Compliant
AUTHORITIES AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial a Partially Compliant
institutions
27. Powers of a Partially Compliant
supervisors
28. Regulation and supervision of Non
DNFBPs
Operational and Law Compliant
Enforcement
29. Financial intelligence a Partially Compliant
units
30. Responsibilities of law enforcement and
investigative
authoritie a Partially Compliant
s Powers of law enforcement and investigative
31. a Partially Compliant
authorities
32. Cash a Partially Compliant
couriers
25
 Ratings – technical
compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT
AUTHORITIES AND OTHER INSTITUTIONAL MEASURES
(continued)
General Requirements
33. Partially Compliant
Statistics
34. Guidance and Partially Compliant
feedback
Sanctions
35. Partially Compliant
Sanctions
INTERNATIONAL
COOPERATION
36. International Largely Compliant
instruments
37. Mutual legal Partially Compliant
assistance
38. Mutual legal assistance: freezing and Non
confiscation
39. Compliant
Largely Compliant
Extradition
40. Other forms of international a Partially Compliant
cooperation

26
 Ratings – technical
compliance

Anti-money laundering and counter-terrorist financing measures in Pakistan - Mutual Evaluation Report - October 2019 27