Connect with us


UPDATED: FATF dangers political backlash over deficient AML rankings for US, China, Australia – accused of ignoring skilled enablers



By PAUL O’DONOGHUE, Senior Correspondent

THE FINANCIAL Action Task Force (FATF) today risked political backlash on both sides of the geo-political divide when it effectively accused both the US and China of enabling financial crime.

The Paris-based agency lobbed a political hand grenade this afternoon when it scored the US, China and also Australia bottom of the class in taking on professional enablers. The findings are made in FATF’s “Horizontal Review of Gatekeepers’ Technical Compliance Related to Corruption.”

The three political powerhouses in both hemispheres were found to have the lowest scores when it came to AML/CFT oversight of lawyers, accountants, realtors and jewellers.

The US, Australia and China scored a terrible 0% on FATF’s guidelines for Designated Non-Financial Professions and Businesses (DNFPBs) survey.

“This is a deep dive into the actions that FATF members have taken to apply important aspects of the FATF Recommendations to gatekeepers,” the body said today. 

‘You might be right but is it the right moment?’ 


DNFBPs include lawyers, accountants, real estate agents as well as jewellers, in some cases, along with dealers in precious metals, such as gold.

Publicly there was no comment from the countries – so far – on being cast on the roll call of shame. But privately there was some anger and bemusement.

FATF meanwhile said that the study shows that: “Corruption and money laundering are inextricably linked. Corrupt actors must launder bribes and misappropriated funds to enjoy their criminal profits. Through their role as gatekeepers to the financial system, non-financial professionals can facilitate, unwittingly or wittingly, high-level corruption.” 

The agency said it requires countries around the globe to apply AML/CFT measures to gatekeepers – lawyers, accountants, trust and company service providers, and real estate agents.

“When these professionals are not regulated in accordance with the FATF Standards, they remain exposed to significant criminal risks and lack those measures that would allow them to see the red flags of money laundering,” the body said.

However, in certain quarters the report and the timing of its publication was raising questions.

“It’s July and the so-called ‘Silly Season.’ Many will think that this is the agency burying bad news and hoping to move on but that’s not how it works,” said a UK-based observer of FATF, speaking on condition of anonymity.

“The secret of FATF up to now is that it has done things discreetly. Sure it socialises things in advance thru governments and agencies but there are never surprises. Okay this was socialised but it is still a surprise, right? Well, that’s not good,” the well placed source added.

“In a nutshell in the current geo-political mess from France to the US and the economic woes in China you could argue why is FATF choosing now to rock the boat? You might be right but is it the right moment? I’m sure that is something that will be studied. FATF is important but it needs to navigate choppy seas,” the source commented.

“You could argue, there is the United States seen as the world’s police officer in terms of AML – outing the Baltics scandal and forcing the EU to face up to its responsibilities. And then places like Luxembourg and Turkey come top of the technical standards. How does that work? This will be ammo to those who say FATF is all about technical,” the source concluded.

‘In Australia however, it is likely to be welcomed as both the government and AML professionals have long intimated that change must come’

The agency’s timing will likely be grabbed on by political commentators, coming as it does ahead of a Presidential election in the US. That is unlikely to endear the Paris-based group with one of its most powerful members.

Moreover, the move is unlikely to be met with a warm reception in Beijing either, where shipping news such as this goes down like a lead balloon.

“Everyone knows that China does not like to be embarrassed. How did FATF think this was a good idea now or any other time?,” said one well placed US observer.

“There are other ways of getting the message across. Of course FATF will argue that they called out the US and Australia too. At the same time, Ukraine will argue why isn’t FATF so assertive on the Kremlin for example; why not black list Russia?,” the source noted.

“Ukraine’s argument for blacklisting got even stronger today given the horrendous bombing of a childrens’ hospital and the unbelievable carnage that resulted. Increasingly, by marginalising the major powers FATF will have to answer why it is in the eyes of some ignoring the war crime committed by the Kremlin,” the source observed.

Nonetheless, in Australia however, it is likely to be welcomed as both the government and AML professionals have long intimated that change must come. Some observers have even predicted that Australia could be greylisted unless it becomes more proactive in fighting financial crime.

The scores were released after FATF recently completed a review looking at how DNFPBs in various countries comply with FATF standards.

The review found that overall there had been improved compliance in implementing FATF recommendations across the some 30 countries surveyed.

The average score was 74% – with more than half of countries scoring 80% or higher.

Portugal and intriguingly, the Duchy of Luxembourg – long castigated as a money laundering enigma – performed best of the 30 nations surveyed by the OECD-linked FATF.

Both EU Member States were found to comply with 100% of FATF technical recommendations for DNFBPs.

FATF is led by executive secretary Violaine Clerc from France and recently elected President Elisa de Anda of Mexico. Singapore’s Raja Kumar just completed his two-year term as President.

Others to come top of the class, meeting the agency’s technical standards for DNFBPs were:

  • Malaysia;
  • Turkey; and
  • Singapore

Turkey of course has just come off the FATF grey list while Singapore has recently been embroiled in one of the biggest ML scandals of the 2020s so far.

FATF said that “on the surface, the Horizontal Review shows positive results – over half of FATF members have scores over 80%. However, these results are less promising when one considers the context and materiality of the seven FATF members falling below the score of 50%. These jurisdictions represent more than half of the world’s GDP.

“Although it is a common perception that the legal profession is subject to fewer AML/CFT rules than other gatekeeper sectors, the Horizontal Review found little difference in coverage scores of the four gatekeeper sectors under the scope of the review – lawyers, accountants, trust and company service providers, and real estate agents. 

“Finally, this review found that some cornerstone obligations of the FATF Recommendations fall behind the compliance levels of other obligations. These requirements—conducting customer due diligence, implementing internal controls, and providing a supervisor with adequate powers to conduct risk-based supervision—are essential requirements to address the vulnerability of gatekeepers to money laundering and corruption threats.

“It is urgent that those FATF members still lagging behind ensure that gatekeepers are adequately covered in line with the FATF’s longstanding Recommendations in this area,” the organization said.

AML Intelligence
We hope you enjoyed reading this article

If you would like unlimited access to AML Intelligence premium articles, newsletter delivered twice a week, access to our Global Bank Fines and Penalties database, free access to Boardroom Series events and much more, select one of our subscription options and become a subscriber!

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *