mr lindsay chan executive officer apg secretariat

Asia/Pacific Group on Money Laundering

WB/APG Regional Workshop for Training WB/APG Regional Workshop for Training Supervisors on AML/CFT Compliance Supervisors on AML/CFT Compliance

SupervisionSupervisionJakarta, Indonesia, May 11-14 2009Jakarta, Indonesia, May 11-14 2009

Session 2 (a):Session 2 (a): Key findings on AML/CFT Key findings on AML/CFT supervision from MERs/DARssupervision from MERs/DARs – –

Strengths and Weaknesses Strengths and Weaknesses

Mr Lindsay Chan Mr Lindsay Chan Executive OfficerExecutive OfficerAPG SecretariatAPG Secretariat


APG Mutual Evaluations – Second APG Mutual Evaluations – Second RoundRound

Report Adopted

- Australia- Cambodia- Canada- Chinese Taipei- Fiji- Hong Kong,

China- Indonesia- Japan- Macao, China- Malaysia- Mongolia- Myanmar- Palau- Samoa- Singapore- Sri Lanka- Thailand

On-site Completed

• Bangladesh• Philippines• Vietnam• Cook Islands• Pakistan• New Zealand

Planned

1. Afghanistan

2. Lao PDR


Relevant FATF RecommendationsRelevant FATF Recommendations

Financial Institutions

CDD and Record Keeping– R.5-12, SRVI

Suspicious Transactions Reporting

- R.13-15, SRIV

Other Measures (shell banks and CTRs)

- R.18, 19

Measures with respect to Countries

- R.21, 22

Supervisory Authorities

Supervision – R.23

Supervisory Powers – R.29

Sanctions – R.17

Guidance and Feedback – R.25

Domestic and International Cooperation – R.31 and 40

Resources and Statistics – R.30, 32


Ratings from APG Mutual Ratings from APG Mutual EvaluationsEvaluations

• Recommendations 23, 29, 17, 25

• R.23, mostly PC but also NC and LC• R.29, mostly PC, some LC/C but no NC• R.17 mostly PC but also NC and LC

• All financial institutions/sectors and not just banking sector

• Consolidated rating – difficult to separate banking sector from non-banking financial sectors


Risk AssessmentRisk Assessment

• No jurisdiction has undertaken a comprehensive risk assessment.

• Some jurisdictions have exempted certain sectors based on risk but assessors have concluded that no proper risk assessments were conducted.

• FATF risk exemption approach is based on proven low risk of ML/TF and NOT the opposite approach i.e. AML/CFT applied when there is a proven ML/TF risk.


Guidelines and Other Enforceable Guidelines and Other Enforceable MeansMeans

• Issues identified in mutual evaluation reports of whether

“Guidelines” issued by competent authorities are “Other Enforceable Means”.

• Other Enforceable Means” refers to guidelines, instructions or other documents or mechanisms that set out enforceable requirements with sanctions for non-compliance.

• FATF inclusion of “Drivers” .


Designated AML/CFT Supervisory Designated AML/CFT Supervisory Authority Authority

(R. 23) and Resources (R.30)(R. 23) and Resources (R.30) • Legal: No designated AML/CFT supervisor or lack of clarity

• Integrated Prudential and AML/CFT Supervisor

• FIU based in Central Bank undertakes AML/CFT supervision

• FIU as AML/CFT supervisor

• Lack of resources for designated supervisor

• Scope issues – not all institutions are covered


Market Entry (Recommendation 23)Market Entry (Recommendation 23)

• Banking licence requirements (but not always based on services provided).

• Fit and proper test requirement but not sufficiently comprehensive e.g. excludes senior management.

• Lack of beneficial ownership requirements for both natural and legal persons with significant or controlling interest– local and foreign.

• Some issues with on-going monitoring and compliance with fit and proper test requirements.


Ongoing Supervision Ongoing Supervision (Recommendation 23)(Recommendation 23)

• No off-site and on-site supervision

• Regular off-site and on-site supervision with a risk based approach

• Lack of effectiveness despite presence of risk assessment and off-site and on-site supervision e.g. not identifying systemic problems or violations

• On-site visits deficient in approach e.g. no sampling or focused on awareness raising


Supervisory Powers Supervisory Powers (Recommendation 29)(Recommendation 29)

• Adequate powers to undertake on-site inspection but there are scope issues

- Inspection limited because of shortcomings in AML/CFT requirements e.g. limited to CDD, STR reporting and record keeping.

• The power to compel production of records is limited e.g. on data and records of deposits and withdrawals.

• Supervisors don’t have powers, beyond onsite inspections, to compel or obtain access to relevant records to monitor compliance.

• Effectiveness: lack of use of powers e.g. lack of inspections or sanctions.


Sanctions Sanctions (Recommendation 17)(Recommendation 17)

• Lack of effective, proportionate and dissuasive sanctions.

• Only criminal/penal sanctions available even for administrative violations.

• There is no criminal sanction for legal persons (Financial Institutions).

• Available administrative penalties are inconsistent.

• There is a lack of persuasive monetary penalties available.


Sanctions Sanctions (Recommendation 17)(Recommendation 17)

• The type and nature of sanctions actually imposed is inadequate in view of the many AML/CFT non-compliance findings.

• The authorities have not adequately reviewed the appropriateness of sanctions in light of the large number of warnings issued to financials institutions.

• The lack of effective sanctions applied in cases of major deficiencies raises real concern in terms of effectiveness of the sanction regime.

• No criminal sanctions have been applied, despite the existence of known serious breaches.

• No statistics available showing how many sanctions had been imposed.


Guidance and Feedback Guidance and Feedback (Recommendation 25)(Recommendation 25)

• Reporting guidelines and basic STR guidelines, measures are adequate. Other guidelines—i.e., internal controls, CDD not covered.

• Lack of specific sectoral guidelines.

• The approach taken to establishing guidelines is not clear and shifts the obligation to issue guidelines to financial institutions

- The competent authorities are required to merely “review” the guidelines and procedures.

• Guidance (including typologies) issued to financial institutions does not cover all of the issues in the relevant FATF Recommendations.

• Guidance has not been updated consistent with current AML/CFT requirements.


Guidance and Feedback Guidance and Feedback (Recommendation 25)(Recommendation 25)

• The only feedback provided is the acknowledgment for submitted suspicious transaction reports.

• Inadequate feedback on STR reporting.

• Need to provide more specific feedback including statistical comparisons of STRs submitted and typologies data.


Domestic and International Domestic and International CooperationCooperation

(Recommendations 31 and 40)(Recommendations 31 and 40)• There is scope to improve co-operation/co-ordination between AML/CFT supervisory agencies, and also to enhance co-operation at the policy level

• Financial regulators and the FIU do not share sufficient information regarding compliance in the financial sector.

• The supervisory authorities have no arrangements for international cooperation in AML/CFT.


THANK YOU!

QUESTIONS?

mr lindsay chan executive officer apg secretariat

Documents

money laundering guidelines

money laundering ratings

coveredasiapacific group

amlcft supervisor fiu

amlcft supervision fiu

proven mltf risk

comprehensive risk assessment

enforceable requirements