Why Tackling Money Laundering Goes To The Heart Of The Fight Against Crime

The Financial Action Task Force (FATF) leads global action to prevent money laundering and terrorist financing. More than 200 countries and jurisdictions have committed to the FATF’s Standards - an international rulebook for combating illicit finance. As a result, we see successful money laundering prosecutions around the world every day. Many countries are actively improving anti-money laundering and counter-terrorist financing systems, deepening inter-agency relations, sharing information, and launching joint investigations. And there is a global consensus that if governments want to build safer societies and stronger, fairer economies, then they need to follow the money behind organised crime and cut off funding for terrorism.

These are notable successes. However, given the scale of the problem, the harsh reality is that global efforts are still faltering. Far too often, the FATF’s country evaluations show a lack of effective action. For many countries, combating money laundering and terrorist financing remains a low priority. Criminals regularly exploit loopholes in financial regulation. Some banks and businesses earn huge profits by ignoring suspicious transactions. Most regulated businesses focus on ‘tick-box’ compliance, rather than targeted, risk-based due diligence checks.

The FATF is focusing on tackling these issues and others. This includes stopping networks of anonymous shell companies and trusts from routinely being used to launder hundreds of billions of dollars each year. Obscuring the true owners of companies is a key technique to hide illicit profits. The FATF first introduced a global standard to deal with this issue in 2003. Unfortunately, our assessments demonstrate that many countries have not effectively implemented these requirements. Loopholes have regularly allowed criminals to use anonymous shell companies to get away with their ill-gotten gains. After an extensive review of the situation, the FATF recently agreed on revisions to global rules on beneficial ownership and is now holding a second public consultation on the issue.

Proposed Beneficial Ownership Revisions

Among a number of proposed changes, countries will need to set up a beneficial ownership registry or use an alternative system that also gives efficient access to ownership information. This will ensure that authorities have good access to adequate, accurate and up-to-date information on the true owners of companies operating in their countries. The FATF has also proposed banning new bearer shares, to strengthen disclosure requirements for those that already exist, and more transparency for nominee arrangements to stop them from being used to hide money laundering.

The new rules, if adopted next year, will be a major step forward in eliminating corporate secrecy. They will strengthen countries’ resistance to illicit finance and help prevent corruption by ensuring authorities can check the ownership of companies in the course of public procurement. This will help trace the funds of criminals and terrorists and prevent tax avoidance and tax evasion.

Complex company ownership structures, often involving shell companies, are also frequently used to launder profits from illegal logging, illegal mining, waste dumping and other crimes that damage natural habitats and harm wildlife. Environmental crimes can generate up to US$281 billion each year.

A priority of the FATF’s German Presidency is to ensure that all countries understand their risks in this area and implement FATF standards so that authorities can trace the profits of organised crime networks that are damaging our planet. To truly make a difference, however, we need all governments to prioritise stopping the laundering of money linked to environmental crimes.

The work of the FATF spans many areas. In recent years, the huge growth of the crypto industry has rightly led to regulatory measures to prevent the risks of crypto assets being used to receive ransoms and launder cash. The FATF has led global efforts in this area, recently releasing updated guidance that outlines how governments and companies can effectively implement the FATF’s Standards for virtual assets and their service providers.

A FATF review earlier this year highlighted how only 58 out of 128 jurisdictions reported that they have the necessary rules in place. This is not good enough. All countries need to ensure that crypto companies are properly regulated. At the heart of this is the so-called ‘travel rule’. This means that providers of virtual assets need to collect and share customer data for transactions over a certain threshold. This will ensure that suspicious transactions can be traced and help prevent illicit finance. The FATF is engaging with governments and the crypto community to ensure the necessary regulations are effectively implemented.

After almost a year and a half as FATF President, in spite of concerns about the future, I am optimistic. The FATF is engaged in a huge variety of work to help fight serious crime and terrorism. From analysing the benefits and risks of new technologies, to giving guidance on how to tackle the financing behind far-right terrorist groups and the smuggling of migrants, the FATF is doing its utmost to make a positive difference. I am not naïve about geopolitics, or the difficulties of overcoming national interests and issues like corruption. But, more than ever, I see a growing recognition and commitment among countries that the current status quo is not good enough. Governments recognise that by following the FATF’s standards, they can trace the profits of organised crime networks, put crooks behind bars, and recover stolen assets. Ultimately, they can make the world a better place. Who can argue with that?

Dr. Marcus Pleyer
Dr. Marcus Pleyer of Germany assumed the position of President of the FATF on 1 July 2020. He succeeded Xiangmin Liu of the People's Republic of China. Dr. Pleyer serves as Deputy Director General in Germany’s Federal Ministry of Finance with responsibilities for policy development and international engagement pertaining International Financial Markets (including FSB, G7, G20 matters), Anti- Money Laundering and Counter-Terrorism Financing (AML/CFT), Financial Sanctions Policy, Digital Finance including Payment Services and Cyber Security and national and international development banks