3/3)J.WINER,DAS, CONG.TESTIMONY ON

[uneoo@xxxxxxxxxxxxxxxxxxxxxxx]

PART 3 OF 3: COMBATING MONEY LAUNDERING
TESTIMONY BEFORE US HOUSE COMMITTEE ON BANKING AND FINANCIAL SERVICES
JUNE 11, 1998. JONATHAN WINER, DEPUTY ASSISTANT SECRETARY
BUREAU FOR INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS 
********
MULTILATERAL ACTIVITIES 

Financial Action Task Force (FATF) 

The Financial Action Task Force on Money Laundering (FATF), which was
established at the G-7 Economic Summit in Paris in 1989, is an
intergovernmental body whose purpose is the development and promotion of
policies to combat money laundering. These policies aim to prevent
proceeds of crime from being utilized in future criminal activities and
from affecting legitimate economic activities. 

The FATF currently consists of 26 jurisdictions and two international
organizations. Its membership includes the major financial center
countries of Europe, North America, and Asia. The 26 FATF member
countries and governments are: Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, Turkey, United Kingdom, and the
United States. The two international organizations are the European
Commission and the Gulf Cooperation Council. One of the guiding
principles of the FATF is that money laundering is a complex economic
crime which cannot be effectively controlled by conventional law
enforcement methods alone, and that finance ministries, financial
institutions, and regulators must work closely with law enforcement
agencies in combating money laundering. Accordingly, the FATF is a
multi-disciplinary body, bringing legal, financial, and law enforcement
experts into the policy-making process. 

In 1997, the FATF focused on several major initiatives. Perhaps the
greatest achievement during 1997 is that all FATF members now have
anti-money laundering legislation substantially in line with the FATF 40
Recommendations. With the strong encouragement of its FATF co-members,
Turkey passed significant anti-money laundering legislation and enacted
implementing regulations which put the law into force in 1997. 

The FATF's second round of mutual evaluations, which commenced in early
1996 and is currently underway, is focused on the practical
effectiveness of members' anti-money laundering measures and also
assesses follow-up action taken in response to the recommendations for
improvement made in the first round. During 1997, FATF conducted 11
second round mutual evaluations. Denmark, the United States, Austria,
Belgium, Switzerland, Canada, Netherlands, Germany, Italy, Norway, and
Japan. In addition, the Gulf Cooperation Council (GCC) agreed to
institute a self-assessment program for its member states. This is a
first step in addressing the problem that although the GCC is a FATF
member, the GCC member states are not subject to FATF member
requirements. 

In February 1997, discussion began on the future of the FATF after 1999.
At the Denver Economic Summit held in June 1997, the G-7 Heads of State
issued a statement which "urged the FATF to review ways to advance its
essential work and consider renewal of its mandate for an additional
5-year period." Specific issues, such as expansion of membership and
identification of possible new members, were approved by the FATF in
February 1998. At the May 1998 meeting of the Finance Ministers of the
G-8 in Birmingham, the FATF mandate was continued for another 5 years. 

The FATF adopted a policy allowing those international organizations
that have agreed to carry out mutual evaluations of their members and
whose evaluation procedures have been validated by the FATF Plenary to
attend the discussions of the FATF mutual evaluation reports and to
receive the related documents. Specifically, the FATF endorsed the
mutual evaluation procedures of the Caribbean Financial Action Task
Force (CFATF), the Council of Europe (which will be focusing on those of
its members which are not FATF members), and the Offshore Group of
Banking Supervisors (OGBS). The FATF will provide guidance to these
organizations and may issue public statements regarding efforts made by
non-members to combat money laundering. This will further encourage
non-FATF members to adopt the FATF's recommendations and procedures. 

In addition, several multilateral development banks, including the
International Monetary Fund (IMF) and the World Bank, are increasingly
focusing on anti-money laundering issues, and the FATF has established a
constructive dialogue with them. The FATF has approached these
organizations and attempted to gain their support for inclusion of
anti-money laundering programs in their operations. 

Other external relations activities included the participation of FATF
representatives in the June 1997 United Nations Center for International
Crime Prevention's Regional Ministerial Workshop on Organized Crime in
Dakar, Senegal. In September 1997, a FATF mission to Cyprus was
conducted to assess the money laundering situation and measures to
combat it. In October 1997, the FATF co-hosted a money laundering
seminar with the Bank of Russia in St. Petersburg. FATF provided a
detailed exposition of anti-money laundering guidelines and
recommendations of various FATF member countries and addressed the issue
of cooperation between the financial sector and law enforcement
authorities. FATF plans to co-host another money laundering seminar with
the Black Sea Economic Cooperation (BSEC) in early 1998. 

In June 1997, Mr. Jean Spreutels of Belgium assumed the FATF Presidency
for FATF's ninth round of work (1997-1998). In June 1998, FATF will
continue to work with the private financial services sector by hosting
another Financial Services Forum. The President-Elect for FATF-X
(1998-1999) is Mr. Jun Yokota from Japan's Ministry of Foreign Affairs.
This will be the first time an Asian FATF member will serve as President
of the FATF. 

During June 1997, FATF established an Internet web site that allows it
to reach a much wider audience, providing access to basic FATF
documents, such as the 40 Recommendations and the annual Typologies
Reports on money laundering methods and trends, as well as other key
documents on money laundering (including the 1988 UN Drug Convention,
the 19 Aruba Recommendations, and the Riga Declaration), and other
documents of concern to FATF members. The site also serves as a single
location in which the texts of various anti-money laundering statutes
and regulations for both FATF and non-FATF members may be placed.
Additionally, users will be able to find still more related information
either through links to other related sites or through contact
information provided within the site. The FATF web site can be found at
http://www.oecd.org/fatf. 

In 1997, FATF created a regional Ad Hoc Group on Central and Eastern
Europe, chaired by the Netherlands, to support, coordinate, and exchange
information between the other international organizations who are
conducting anti-money laundering initiatives in the region. There are
currently Ad Hoc Groups on Asia (Australian Chair) and Latin America
(French Chair). The regional ad hoc groups serve as a catalyst for
external relations efforts in each particular region and have been
instrumental in creating FATF regional bodies. 

An Ad Hoc Group on Estimating the Magnitude of Money Laundering, chaired
by FinCEN's Director, was also established last year to develop a
methodology to measure the money laundering problem from a global
perspective. The purpose is to confirm that money laundering is a
significant element in the global financial system and to quantify the
amount of money laundering activity. Each participating country has
formed an advisory board of experts for the purpose of identifying the
quantifiable sources of data. This Ad Hoc Group will compile a draft
methodology which will be used to develop a quantifiable estimate of the
problem. Several international organizations, including the OECD, IMF,
INTERPOL, Commonwealth Secretariat, and OAS/CICAD, are actively
contributing to the work of this group. Once determined, this figure
will allow policy makers and the public, through press reporting, to
appreciate the critical value of anti-money laundering programs and
their relationship to ensuring the integrity of the global financial
system. 

In November 1997, the FATF concluded a highly successful meeting on
money laundering typologies. The purpose of the typologies exercise is
to provide a forum for law enforcement experts--those primarily tasked
with combating money laundering--to discuss recent trends in the
laundering of criminal proceeds, emerging threats, and effective
countermeasures. Discussions focused primarily on new payment
technologies, remittance services, and the use of non-financial
businesses in money laundering schemes. Money laundering countermeasures
were also discussed in greater detail than in prior years. Overall, FATF
jurisdictions found that conventional money laundering methods are still
being used with refinements being made to existing techniques. In
addition, as new countermeasures are developed, money launderers
continue to shift from traditional financial institutions to
non-financial businesses. The FATF will meet next at the end of June
1998. 

Asia-Pacific Group on Money Laundering (APG) 

In order to make progress in the external relations work of the FATF, an
"FATF Asia Secretariat" was created in 1994 to set up a regional
anti-money laundering body in the Asia-Pacific region. The United States
has been working with the FATF to create regional anti-money laundering
groups to form an international alliance against money laundering.
Through the results of the FATF Asia Secretariat and other FATF members,
the Asia-Pacific Group on Money Laundering (APG) was formally
established in February 1997 at the Fourth Asia-Pacific Money Laundering
Symposium in Bangkok, Thailand. Initial membership of the group consists
of Australia, Bangladesh, Hong Kong, Japan, New Zealand, People's
Republic of China, Philippines, Singapore, Sri Lanka, Taiwan, Thailand,
the United States, and Vanuatu. The establishment of this group is a
positive step toward recognizing that money laundering is a significant
international issue that affects the Asia-Pacific region and that
jurisdictions within the region need to cooperate in combating money
laundering. 

The APG will meet twice yearly to provide a focus for regional
anti-money laundering efforts and will work in close cooperation with
the FATF and the CFATF. The first goal of this group is to develop a
statement of principles and measures for application within the region. 

The Fourth Asia-Pacific Money Laundering Symposium also resulted in a
set of proposed recommendations and a consensus that money laundering is
a serious threat that must be addressed globally. Participants
recognized that money laundering undermines the integrity of the
region's financial institutions and that anti-money laundering controls
have a positive effect on economic growth by attracting legitimate
investments and capital. There was agreement that bank secrecy laws
should not interfere with the ability to ensure the integrity of
financial institutions and that central banks and Finance Ministries
play a very important role. It was also recognized that the offense of
money laundering should cover all serious crimes. 

In July 1997, the first meeting of the APG's Working Party was held in
Beijing, China. The Working Party developed a work program and a
statement of principles and measures for application within the region
in relation to money laundering. The Working Party agreed that the APG
accepts the FATF 40 Recommendations in principle as the "international
standard" and discussed how they can be applied in the region. The APG
will have members complete anti-money laundering "jurisdiction reports"
which will include each jurisdiction's relevant laws as well as identify
what training is needed. 

In 1997, the Asia-Pacific Economic Cooperation (APEC) continued to
express support for anti-money laundering initiatives. The APEC Finance
Ministers issued a Joint Ministerial Statement on April 6, 1997 which
supported the establishment of the APG. The anti-money laundering text
of that statement follows: 

Money laundering remains a priority concern because of the threat it can
pose to the integrity of legitimate financial institutions. In this
regard, we welcome the establishment of the Asia-Pacific Group on Money
Laundering of which several APEC economies are members. We pointed out,
however, that money laundering is a global phenomenon and in this
regard, we encourage all other economies to join in a determined global
effort to effectively address it. We ask the assistance of the relevant
international organizations to integrate support for anti-money
laundering activities in their operations to strengthen the integrity of
financial systems. 

During March 1998, the APG held its first annual meeting in Tokyo,
Japan. As part of the meeting, the group established an action plan
which addressed the FATF 40 Recommendations, agreed to the completion of
the tasks identified at the Beijing Working Party Meeting, and agreed to
conduct various other tasks such as assistance missions to member
jurisdictions, money laundering workshops, and missions to offshore
financial centers in the South Pacific. 

Caribbean Financial Action Task Force (CFATF) 
/END PART 3.
-- 
HTTP://www.physics.adelaide.edu.au/~uneoo
EMAILS: drunoo@xxxxxxxxxxxx, uneoo@xxxxxxxxxxxxxxxxxxxxxxx
POSTMAIL: Dr U Ne Oo, 18 Shannon Place, Adelaide SA 5000, AUSTRALIA
[http://freeburma.org/[http://www.angelfire.com/al/homepageas/index.htm]
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =