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Article
Publication date: 4 January 2008

Jackie Johnson

To gauge the extent to which the global financial system is anti‐money laundering (AML)/countering the financing of terrorism (CFT) prepared by analysing and comparing the…

1743

Abstract

Purpose

To gauge the extent to which the global financial system is anti‐money laundering (AML)/countering the financing of terrorism (CFT) prepared by analysing and comparing the AML/CFT systems of Financial Action Task Force (FATF) members with countries belonging to regional AML organisations.

Design/methodology/approach

Mutual evaluation data of 16 FATF members and 21 non‐FATF countries is analysed and compared using Kruskal‐Wallis and paired‐t tests to determine similarities and differences across the two groups of countries.

Findings

AML/CFT systems of FATF members and non‐FATF countries are poor. The lack of compliance with global AML/CFT standards leaves so many holes in these countries' regulatory, financial, and legal systems that money laundering with or without any relationship to the financing of terrorism, would be relatively easy to achieve.

Research limitations/implications

In using an analytical approach it has been necessary to put numerical values on compliance levels used by the FATF. Given that these are very broad, substituting a single value for each compliance level will provide only a crude measure of compliance for comparisons to be made. The results should therefore be used as a guide to the ranking and compliance of countries rather than some exact measurement of compliance.

Practical implications

There will need to be follow‐up visits to this round of mutual evaluations to evaluate country responses to their poor assessments.

Originality/value

Publication of mutual evaluations by the FATF and a number of regional bodies has enabled a comparison of AML/CFT systems from countries around the world. Lack of data has not enabled this to be done before.

Details

Journal of Financial Crime, vol. 15 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 10 May 2011

Neil Jensen and Cheong‐Ann Png

This paper aims to examine the extent to which the Financial Action Task Force (FATF) 40+9 Recommendations have been implemented by developing countries from the…

1916

Abstract

Purpose

This paper aims to examine the extent to which the Financial Action Task Force (FATF) 40+9 Recommendations have been implemented by developing countries from the Asia‐Pacific region and the issues pertaining to these countries.

Design/methodology/approach

The paper uses the compliance ratings from published reports of assessments/mutual evaluations for these countries between 2004 and 2010 and makes comparisons with the ratings for FATF countries for that period.

Findings

These developing countries have demonstrated positive developments in addressing anti‐money laundering and combating the financing of terrorism (AML/CFT) requirements and having their level of compliance evaluated through the rigorous process of assessment/mutual evaluation. Nonetheless, the general level of compliance is quite limited, not least when compared with FATF countries. This may be due to complexities of the FATF 40+9 Recommendations, challenges in prioritizing AML/CFT development amidst other national priorities and general limited capacity in these countries. An appreciation of the challenges faced by these countries is essential in the formulation and implementation of AML/CFT measures for these countries.

Originality/value

This paper considers implementation of international standards for AML/CFT from the perspective of developing countries, which is an important contribution given the needs and peculiarities of these countries.

Details

Journal of Money Laundering Control, vol. 14 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 4 January 2008

Jackie Johnson

To review the reported compliance levels of third round mutual evaluations with a view to determining any change or differences in compliance levels for Financial Action…

993

Abstract

Purpose

To review the reported compliance levels of third round mutual evaluations with a view to determining any change or differences in compliance levels for Financial Action Task Force (FATF) member countries following the updating of FATF's Forty Recommendations in 2003 and the introduction of the Nine Special Recommendations relating to the financing of terrorism.

Design/methodology/approach

A comparison of pre‐ and post‐2003 compliance with the FATF's Forty Recommendations and Nine Special Recommendations is made using both self‐assessment and mutual assessment data.

Findings

There are significant differences in compliance levels pre and post 2003. Since, the FATF updated their Forty Recommendations in 2003 compliance with those Recommendations has declined. With regard to the Nine Special Recommendations which have not changed since their introduction there is a significant difference between self‐assessment compliance levels in 2003 and compliance determined using independent mutual evaluations, casting doubt on the value of self assessment.

Research limitations/implications

In using an analytical approach it has been necessary to put numerical values on compliance levels used by the FATF. Given that these are very broad, substituting a single value for each compliance level will provide only a crude measure of compliance for comparisons to be made. The results should therefore be used as a guide to the ranking and compliance of countries rather than some exact measurement of compliance.

Practical implications

The value of self assessment by FATF members should be re‐evaluated.

Originality/value

Publication of the third round of FATF mutual evaluations provides an opportunity, not previously available, to analyse the compliance levels amongst FATF members.

Details

Journal of Money Laundering Control, vol. 11 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 2 July 2019

Emmanuel Senanu Mekpor

The purpose of this paper is to investigate how well countries comply with global anti-money laundering and counter-financing of terrorism (AML/CFT) regulations.

1001

Abstract

Purpose

The purpose of this paper is to investigate how well countries comply with global anti-money laundering and counter-financing of terrorism (AML/CFT) regulations.

Design/methodology/approach

With the help of an AML/CFT compliance index composed by the author, this study is able to numerically quantify countries’ AML/CFT compliance levels. Countries were selected based on their membership with the Financial Action Task Force (FATF), precisely members who have gone through at least one round mutual evaluation and have duly submitted a report to the task force. The AML/CFT index was composed by assigning numeric values to the individual country ratings across all 49 FATF recommendations contained in their mutual evaluation reports (MER).

Findings

Some notable findings include the yearly global level of AML/CFT compliance between the period 2004 and 2016, as well as compliance levels across continents for the same period. Compliance levels for the seven components of the FATF recommendations were also reported to help assess which set of recommendations countries comply with the most and why they do. It was also found that countries’ lack of compliance was as a result of high cost of compliance with FATF recommendations.

Research limitations/implications

The main limitation of this study was a lack of high-frequency AML data of countries, especially less-developed countries.

Originality/value

The uniqueness of this paper lies in the fact that the AML/CFT compliance index constructed and used in the study is the first of its kind.

Details

Journal of Money Laundering Control, vol. 22 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 1 January 2006

Jackie Johnson

To highlight the compliance issues which face gambling entities with the implementation of the Financial Action Task Force's (FATF's) 2003 Forty Recommendations

632

Abstract

Purpose

To highlight the compliance issues which face gambling entities with the implementation of the Financial Action Task Force's (FATF's) 2003 Forty Recommendations

Design/methodology/approach

To determine the gambling sector's attitudes towards the FATF's new anti‐money recommendations their responses to an earlier FATF consultation paper are analysed. Interested parties were asked to provide feedback on a number of options proposed by the FATF. Twenty six of the 145 respondents provided feedback on issues relating to the gambling sector. It is these responses that form the bases of the analysis in this paper.

Findings

The preferences of the gambling sector were not taken on board by the FATF. The increased customer due diligence (CDD), suspicious transaction reporting and the identification of politically exposed persons will be a burden on casino operators, the only gambling sector to be specifically identified in the new recommendations. Non‐compliance could be a serious issue.

Research limitations/implications

The small number of responses from the gambling sector does place limitations on the ability to generalise the outcomes to the global gambling industry, though five of the respondents were gambling organisations.

Practical implications

For regulators, the possibility of non‐compliance by the gambling sector should be addressed as should the likelihood of pressure for reduced CDD procedures.

Originality/value

The FATF's updated 2003 Forty Recommendations impose considerable compliance costs on the financial sector. A number of other business sectors are also caught within the scope of these new recommendations. This paper addresses anti‐money laundering compliance issues for the gambling sector, an area not previously explored.

Details

Journal of Money Laundering Control, vol. 9 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 2 January 2018

Akira Matsuoka

To identify the reason of Japan not complying with the Financial Action Task Force (FATF) recommendation 35 and suggesting a strategic solution to overcoming the barrier.

Abstract

Purpose

To identify the reason of Japan not complying with the Financial Action Task Force (FATF) recommendation 35 and suggesting a strategic solution to overcoming the barrier.

Design/methodology/approach

Through contextual, historical, and legal analysis of the anti-money laundering (AML) measures in Japan.

Findings

This paper implies that less flexible mindsets in stone of major players in the field of AML measures in Japan are the fundamental barrier for Japan not complying with the FATF Recommendation 35, while this paper suggests better realistic ways to address the barrier.

Originality/value

The novel point of this paper is that this paper illustriously uncovers the mindsets of the major players pertaining to the Japanese AML measures in a very illustrative way, points out the underlying true barrier, and describes a useful strategy desperately needed to address the barrier.

Article
Publication date: 31 August 2020

Nankpan Moses Nanyun and Alireza Nasiri

This paper aims to examine the extent of successes and challenges of adoption and implementation of Financial Action Task Force (FATF) codes in member states by…

Abstract

Purpose

This paper aims to examine the extent of successes and challenges of adoption and implementation of Financial Action Task Force (FATF) codes in member states by highlighting the influence of the FATF anti-money laundering policy framework on money laundering (ML) and the way forward in heightening the fight against the fast-evolving nature of ML and terrorist financing activities.

Design/methodology/approach

This paper, based on a purely qualitative desktop study, is drawn on historical information from FATF’s recommendations, its periodic reports, publications and other secondary sources such as books, journal articles on financial systems and scholarly literature.

Findings

The challenges found include difficulty in domestic coordination, capacity constraints of countries, inadequate operational resources and assessment complexities in the implementation of FATF standards. Nonetheless, FATF has chalked some successes such as the harmonization of legislation and enforcement efforts through the provision of coordination points. Other successes include flexibility in response to new threats, adoption of the mutual evaluation process, which advanced peer pressure on defaulting members, enhancement of the international financial space and the enhancement of the legitimization of FATF’s processes.

Originality/value

This paper provides a description of the successes and challenges of the FATF’s 40 + 9 recommendations since its establishment. The outcome would alert countries and players within the international financial space to invest more in capacity building and the entrenchment of the recommendations into their domestic laws.

Details

Journal of Money Laundering Control, vol. 24 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 1 January 2001

Kern Alexander

This paper analyses the international regime of rules, principles and standards designed to reduce the risk of money laundering in the international financial system. The…

1732

Abstract

This paper analyses the international regime of rules, principles and standards designed to reduce the risk of money laundering in the international financial system. The international anti‐money‐laundering regime ranges from a variety of soft law (non‐binding) principles and rules that involve voluntary cooperative arrangements among states that have evolved in recent years, to a more specific legal framework that binds an increasing number of major states. In particular, the Financial Action Task Force (FATF) and its member states have played a crucial role in developing international norms and rules that require financial institutions to adopt minimum levels of transparency and disclosure to prevent financial crime. The FATF has focused its anti‐money‐laundering efforts on financial institutions because of the ease with which criminal groups have used financial institutions to transmit the proceeds of their illicit activities and because of the threat that money laundering poses to the systemic stability of financial systems.

Details

Journal of Money Laundering Control, vol. 4 no. 3
Type: Research Article
ISSN: 1368-5201

Article
Publication date: 5 June 2020

Doron Goldbarsht and Hannah Harris

This paper aims to explore the case of counter-terrorist financing (CTF) within the transnational regulatory network (TRN) of the Financial Action Task Force (FATF). The…

Abstract

Purpose

This paper aims to explore the case of counter-terrorist financing (CTF) within the transnational regulatory network (TRN) of the Financial Action Task Force (FATF). The paper demonstrates how the structure and operation of the FATF reflect those of a TRN and shows how the FATF has been successful in securing formal compliance with CTF policies.

Design/methodology/approach

The paper stresses that formal compliance does not guarantee actual compliance or effective enforcement. It is argued that the FATF and the CTF regime must balance concerns for legitimacy with those of flexibility and efficiency. Traditionally, TRNs have focused on flexibility, efficiency and informal cooperation over legitimacy. This paper demonstrates that legitimacy concerns cannot be ignored.

Findings

A lack of legitimacy may ultimately result in non-compliance and ineffectiveness. On this basis, current efforts to build legitimacy through the FATF are noted but deemed insufficient. If this balance is not struck, the FATF may be doomed to failure through an overreliance on coercive methods. Particularly in the case of CTF, coercion is insufficient for meaningful compliance. Global enforcement by diverse states is a necessary condition for the success of the regime.

Originality/value

This paper will fill the gaps existing in the literature by examining CTF, as well as the FATF as an example of TRN. This approach differs from other literature in the field, which deals solely with the effectiveness of the FATF and the global CTF without considering the effect of legitimacy on compliance.

Details

Journal of Financial Crime, vol. 27 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 3 July 2017

Salwa Zolkaflil, Normah Omar and Sharifah Nazatul Faiza Syed Mustapha Nazri

This study aims to discuss the Financial Action Task Force (FATF) Special Recommendation IX (SR IX) and the importance of complying with the recommendation, which focuses…

Abstract

Purpose

This study aims to discuss the Financial Action Task Force (FATF) Special Recommendation IX (SR IX) and the importance of complying with the recommendation, which focuses on cross-border declaration or disclosure with the objective to detect and prevent illicit cross-border transportation of cash and bearer negotiable instruments (BNIs). This study also looks into compliance ratings of Asia Pacific Group (APG) 40 countries on the FATF SR IX.

Design/methodology/approach

This study reviews the mutual evaluation reports issued by APG on money laundering from 2006 to 2012. Based on the mutual evaluation reports, this study also looks into recommendations and comments given by respective panels. The compliance ratings together with panel’s recommendations and comments compiled in this study will be helpful to relevant authorities for future improvement.

Findings

Complying to FATF SR IX helps relevant authorities in detecting and preventing illicit from cross-border transportation of cash and BNIs. Out of 40, only two countries received compliant rating, which shows the need of improvement to ensure that the country is compliant on FATF SR IX.

Research limitations/implications

This study is limited to the panel’s reviews and recommendations on mutual evaluation report and only focuses on FATF SR IX.

Originality/value

This paper analyzes the compliance characteristics of countries based on their FATF mutual evaluation report. It highlights the comments and recommendation for future improvement to ensure that these countries will comply with FATF SR IX.

Details

Journal of Money Laundering Control, vol. 20 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

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