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IMF report damns useless FATF standards

August 21, 2011

The most important international anti-terror financing organization in the world, the Financial Action Task Force (FATF), has been ridiculed by a report from the International Monetary Fund (IMF).

Of course, all these people are members of the global power establishment, so they use a lot of polite words, but it pretty much boils down to a comment from IMF employee Jody Myers that the modern FATF style anti-money laundering (AML) system “isn’t helping” and “why are we doing it.”

Indeed, the international system is cumbersome, anti-business, anti-bank, anti-investor, anti-consumer, and only anti-terrorist on rare, almost coincidental occasions.  Everybody who uses a bank gets treated like a terrorist, and the real terrorists escape notice through the sheer volume of bank data being transferred around the world.  Nobody wants to discuss a possible solution which involves profiling bank customers.

From MoneyLaundering.com on Aug. 2:

AML Standards Should Be Revised to Better Root Out Crime, Says IMF

By Brian Monroe

Intergovernmental evaluations of how nations fight money laundering and terrorist financing often do not accurately reflect whether those efforts are effective, the International Monetary Fund said in a report Wednesday.

The jurisdictional examinations conducted by the Paris-based Financial Action Task Force (FATF) and other groups that follow its 49 standards “do not correlate” with whether a country is involved with narcotics trafficking, the organization said in a 97-page report. But that criterion is a “rough proxy” for whether a nation is at real risk of the crimes, the group said.

What’s more, the current anti-money laundering (AML) and counter-financing of terrorism (CFT) standards fail to sufficiently take into account cases when jurisdictions score well on reports for passing laws that they do not strictly enforce, said the organization, known as the IMF.

The report is a “fundamentally important critique” of FATF meant to raise questions about whether the intergovernmental group’s examinations are working, said Jody Myers, head of the Financial Integrity Group in the IMF Legal Department, which oversees AML and CFT evaluations.

“If implementing AML/CFT controls isn’t helping to solve a country’s money laundering problem, or better yet, contributing to the rule of law more generally, why are we doing it,” Myers said.

FATF, a group launched in 1989, has drafted the standards used by 11 international groups, including the IMF and the World Bank. The Paris-based group is considering changes to its 49 recommendations that could be announced as early as February, according to organization.

The results to date of efforts to root out money laundering and terrorist financing have been modest at best, according to the report. Overall compliance levels by the 161 nations examined under FATF standards between 2004 and 2011 have been “low,” leaving few improvements to transparency and “widespread weak compliance” by financial institutions, the IMF said.

In some cases, countries may score well by the standards in part because of their relative wealth, which allows them to more comprehensively implement controls, the report said. But wealthy countries can also be largely compliant with FATF’s recommendations while contributing “a great deal to the global drug problem,” the IMF said.

And while approximately 40 percent of jurisdictions examined were given credit on examinations for passing laws meant to better identify legal entities, many of the countries are “still hampered by difficulties in identifying…the ultimate beneficial owners” of funds and assets, according to the report.

FATF’s efforts also suffer because the organization doesn’t offer a broader analysis of the crimes that takes into consideration developments and data that fall outside of the scope of its standards, the report said…

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