By Dan Byrne for AMLi
ON Friday, FATF President Dr Marcus Pleyer spoke to G20 leaders and central bank governors on the threats of financial crime. He addressed colleagues from nations across the world, who are all nearing their first anniversary of COVID restrictions and lockdowns.
His main message was simple: the fight against dirty money matters now more than ever. But here’s a more thorough run-down of what his comments mean for those efforts – and what their future looks like as the pandemic still rages.
1. FATF will not let COVID relegate their work to the back seat – and the G20 are listening.
The COVID-19 crisis succeeded in diverting attention away from other public priorities in early 2020. Even Brexit negotiations took a back seat in European policy for several months during the initial European lockdowns.
However, Dr Pleyer’s words reaffirm that FATF has no desire to let the fight against financial crime take a back seat to COVID-19.
If anything, FATF is eager to show the opposite: the two issues are so interwoven that they must be considered together in future policy discussions.
“It remains critical that jurisdictions continue to actively identify, assess, and understand how criminals and terrorists can exploit the COVID-19 pandemic,” FATF’s statement read Sunday.
It then zoned in on the potential monetary threat that COVID-related financial crime poses to health services and – thus – to people’s well-being and chances of survival when they contract the disease.
With the focus on impacts of this level, it seems that neither FATF nor the G20 are happy to set aside AML efforts until the COVID-19 crisis passes.
2. FATF wants action from both the public and private sectors.
Recently amended FATF standards require a combined form of action from both the public and private sectors to effectively combat money laundering and terrorism financing.
FATF’s statement stressed that “countries and the private sector must also take action to mitigate these risks, as well as to enhance domestic co-ordination.”
Essentially, the organisation is calling on its member countries to make standards their law, and then compel financial institutions to follow it thoroughly.
It’s in keeping with the widely embraced public-private partnership approach to financial crime, however it may meet some pushback from financial institutions with different ideas about their roles.
Dr Martin Navias, research fellow at King’s College London and expert in anti-money laundering, told a compliance conference this month that legal compliance efforts were “enormously expensive and time-consuming.”
In defence of banks in the United Kingdom, he maintained that sometimes it should not fall to these institutions to be the last line of defence against financial crime – particularly when it came to financing terrorism, which was largely hindsight-based, Navias said.
“Banks cannot identify these kinds of terrorist attacks before they take place using the tools that they have,” he stressed. “If, after the event, the authorities provide us with information, then there’s scope.”
3. FATF and the EU appear to be singing from the same song sheet.
Not only does FATF endorse the European idea of cooperation across international borders to fight crime, but it also shares more specific similar priorities.
FATF has said it will work with the G20 closely when it comes to environmental crime, the use and development of new technology, migrant smuggling, and illicit arms trafficking.
Some of the EU’s biggest priorities for the next ten years and beyond are reflected in these promises, showing that there is huge scope for a three-pronged collaborative effort between FATF, it’s EU members, and the rest of the bloc in association.
The pledge to work with the G20 on environmental crime, which FATF estimates to result in criminal profits of up to $260 billion per year, aligns closely with the EU’s ever-toughening green policies, such as its pledge to be carbon-neutral bloc by 2050.
Similarly, the last ten years of Mediterranean crises have exposed the true horrors of migrant smuggling – and the fact that EU members states have struggled to deal with it.
Commitment from FATF to work against these same problems suggests a mutually beneficial arrangement could develop moving forward.
So they appear to be singing from the same hymn sheet. Let’s see how this one plays out.
4. Criminals change with everyone else
2020 has been year that societies adapted in the face of COVID-19. It’s a similar story for financial criminals.
With FATF’s assertion that the pandemic has led to an increase in financial crime, they are eager to demonstrate just how quickly criminals can match that progress – changing their techniques and targets to areas with the greatest chance of success.
Counterfeit medical goods and scams to exploit pandemic supports are occurring – enough to make FATF worried that SMEs, the newly unemployed, and sectors like real estate and construction are in serious trouble.
“They appear to be particularly vulnerable,” Pleyer said. “And with rising numbers of people out of work, there is an increased chance of the vulnerable being used as money mules – for criminals to launder their illicit cash.”
Pleyer’s answer to the problem is a call for leaders “to keep the fight against money laundering high on their agendas.”
It may present an extra layer of challenges for national governments to think about as they try and maintain the pace of adaption in the next 18 months.
5. Crypto is the battleground
Virtual assets were an area of concern before the pandemic started, and they show no signs of fading in prominence now.
Cryptocurrencies – and, in particular, ‘stablecoins’ – received specific mention by Dr Pleyer and FATF. It comes at a time when digital finance is taking on an entirely new degree of importance amidst COVID lockdowns.
FATF considers stablecoins to pose “key risks,” to the fight against money laundering. It has also re-affirmed its commitment to “closely monitor the changes in the virtual asset sector, engaging with relevant standard-setting bodies to identify and address the risks that emerge.”
Now, different jurisdictions such as Hong Kong, Singapore and the Cayman Islands are rushing to implement new cryptocurrency laws.
Meanwhile, there is growing support for digital versions of some of the most common currencies worldwide like the yuan and the euro, so that governments can increase their influence in a historically private arena.
These measures, and the words of FATF and the G20, suggest that virtual assets are taking centre stage for the foreseeable future – becoming a make-or-break financial channel that will show the true progress of the fight against dirty money.
6. How good is the relationship between FATF and the G20 – so far so good.
The support and understanding is mutual between FATF and the G20:
President Dr Marcus Pleyer re-affirmed his organisation’s commitment to working with the G20 to ensure a “strong, sustainable economic recovery from the COVID-19 crisis,” while the G20 leaders have issued a statement supporting FATF “as the global standard-setting body for preventing and combating money laundering”
The outwardly collegial relationship belies the fact that as of October 2020, eight G20 nations had yet to incorporate important FATF standards regarding ‘stablecoins’ into their national laws.
‘Stablecoins’ –cryptocurrencies that are backed by an external commodity like fiat currency or precious metal – were specifically mentioned by FATF as an important component for international standards on virtual assets.
But some G20 leaders have clearly been slow to the mark.
In a previous address in October, Dr Pleyer himself highlighted the lack of progress on these standards, despite the new regulation standards being introduced in August.
However, this does not appear to have created any noticeable rift between the two bodies who, based on last week’s developments, remain set on common goals and strategies. Again, watch this space.
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