The Financial Action Task Force (FATF) released a report earlier this month titled “Horizontal Review of Gatekeepers’ Technical Compliance Related to Corruption" a bit of a mouthful but basically it examines the effectiveness of anti-money laundering (AML) and counter-terrorist financing (CTF) measures implemented by various non-financial professionals (referred to as gatekeepers). This includes lawyers, accountants, trust and company service providers, and real estate agents. Here are the key points from the report:
1. Purpose and Scope: The report assesses how well gatekeepers are implementing AML/CFT measures to prevent corruption-related money laundering. Gatekeepers play a crucial role as intermediaries in financial transactions and can either facilitate or hinder illicit financial flows.
2. Current Compliance Levels: The review found that over half of the FATF member jurisdictions achieved compliance scores above 80%. However, seven jurisdictions* representing more than half of the world’s GDP scored below 50%, highlighting significant compliance gaps.
3. Uniformity Across Professions: Contrary to common perceptions, the compliance levels among different gatekeeper sectors (lawyers, accountants, trust and company service providers, and real estate agents) were found to be relatively consistent.
4. Key Deficiencies: The report identifies critical areas where compliance is lacking, particularly in conducting customer due diligence, implementing internal controls, and empowering supervisors with adequate authority for risk-based supervision. These deficiencies are significant because they undermine the effectiveness of AML/CFT measures.
5. Urgent Recommendations: The FATF emphasises the urgency for lagging jurisdictions to enhance their regulatory frameworks in line with established FATF Recommendations. This includes ensuring that gatekeepers are adequately trained and equipped to detect and prevent money laundering and corruption.
6. Global Impact: The review highlights the global implications of non-compliance, given that poorly regulated jurisdictions can serve as weak links in the international financial system, facilitating the flow of illicit funds across borders.
*You’ll be pleased to note that the UK is most definitely not one of these seven jurisdictions, and we score an impressive 97%! The <50% scorers are the United States, China, Australia, Brazil, Israel, South Korea, and Mexico.
The United States, China and Australia all scored 0% as they don’t have requirements to cover any of the gatekeeper sectors. In these three jurisdictions, these sectors aren't required to implement any of the preventive measures that have been required by the FATF Standards since 2003 and supervisors have none of the powers and tools to implement supervisory programmes on these gatekeeper sectors.
So, good news for the UK and many other FATF member countries. However, if you’re dealing with or placing reliance on gatekeepers in any of those seven jurisdictions (particularly the United States, China and Australia) then make sure you are fully covering your AML/CTF requirements.
If you have questions about this, or anything else FinCrime Prevention-related, drop us a line at: contact@coventium.com.
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