The sixth and final Plenary of the Financial Action Task Force (FATF) under the Presidency of T. Raja Kumar of Singapore marked significant progress and established future priorities. Here are the main takeaways from the plenary.
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Virtual Assets: Implementation Update
The FATF will release its fifth annual update on the implementation of FATF Standards for virtual assets (VA) and virtual asset service providers (VASPs) in July 2024. Since June 2023, the number of compliant jurisdictions has risen from 25 to 33. Despite this progress, 75% of jurisdictions (97 out of 130) remain only partially or non-compliant, indicating that VASP implementation still lags behind other financial sectors. The FATF urges jurisdictions to achieve rapid, full compliance and will continue providing support to this end.
Payment Transparency
Following a public consultation that ended in May 2024, to which Notabene publicly responded to here, the FATF is revising its standards to align with evolving cross-border payment systems and industry standards like ISO20022. These revisions aim to enhance the speed, cost-effectiveness, transparency, and inclusivity of cross-border payments while maintaining AML/CFT compliance. Further dialogue with experts is needed before finalizing these amendments.
Jurisdictions Under Increased Monitoring
Monaco and Venezuela have been added to the list of jurisdictions subject to increased monitoring. Congratulations to Jamaica and TĂĽrkiye which have been removed from this list, reflecting their improved compliance.
High Risk Jurisdictions - Call for Action
The FATF reiterated its concerns over certain high risk jurisdictions in its Call for Action. Specifically for Democratic People’s Republic of Korea (DPRK), Iran, and Myanmar.Â
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‍Democratic People's Republic of Korea (DPRK) 🇰🇵‍
FATF remains deeply concerned about the DPRK's failure to address significant AML/CFT deficiencies and the proliferation financing risks posed by its illicit activities related to WMDs. The FATF urges all jurisdictions to:
- Terminate correspondent relationships with DPRK banks.
- Close any DPRK bank branches or subsidiaries.
- Limit financial transactions with DPRK persons.
Greater vigilance and enforcement are required, especially given DPRK's increased financial connectivity and use of front companies to evade sanctions.
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Iran 🇮🇷
Since Iran has not completed its action plan, including enacting key conventions, the FATF calls for:
- Enhanced supervisory examination for Iranian financial institutions.
- Systematic reporting of financial transactions.
- Increased external audit requirements.
Until Iran fully implements the required measures, the FATF maintains concerns over terrorism financing risks from Iran.
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Myanmar 🇲🇲
Due to slow progress in addressing AML/CFT deficiencies, the FATF calls for enhanced due diligence measures. Financial institutions should:
- Increase monitoring of business relationships.
- Ensure legitimate financial flows, such as humanitarian aid and remittances, are not disrupted.
If no further progress is made by October 2024, the FATF will consider applying countermeasures.
Mutual Evaluation Reports: India and Kuwait
India has achieved a high level of technical compliance with FATF requirements, particularly in understanding ML and TF risks, international cooperation, and access to beneficial ownership information. However, improvements are needed in supervising non-financial sectors. Kuwait is also nearing compliance but requires further progress.
Review of Gatekeepers
FATF will publish its findings on the regulation of gatekeepers in July 2024. These entities, if unregulated, remain exposed to significant criminal risks and may fail to detect money laundering red flags.
Women in FATF and the Global Network (WFGN) Initiative
Notabene commends Minister Indranee Rajah who launched the e-book “Breaking Barriers: Inspiring the Next Generation of Women Leaders,” showcasing the resilience and expertise of women in combating financial crime. This initiative, part of the Women in FATF and the Global Network (WFGN), aims to inspire and support aspiring women leaders and complements the multicultural mentoring program.
Compliance with FATF Standards
The Plenary approved revised criteria for prioritizing countries for the International Cooperation Review Group (ICRG) review process. This will ensure that the listing process remains risk-based, fair, and transparent. Members also agreed on assessment methods for compliance with the revised FATF Standards on asset recovery and related international cooperation, adopted in October 2023.
Incoming Mexican Presidency’s Priorities (2024-2026)
As many know, Elisa de Anda Madrazo, is the incoming President. She outlined the Mexican Presidency’s priorities, which include:
- Advancing financial inclusion through risk-based implementation of the Standards.
- Ensuring a successful start to the new round of assessments.
- Strengthening the cohesion of the Global Network by fostering transparency and unity.
- Supporting effective implementation of revised FATF Standards, focusing on asset recovery, beneficial ownership, and virtual assets.‍
- Continuing efforts to combat terrorist and proliferation financing.
The outcomes of this Plenary set a robust agenda for the FATF, emphasizing the need for rapid compliance, enhanced transparency, and international cooperation to combat financial crime effectively. We at Notabene are excited to support this and eager to see how this will unfold in the coming year.
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