US urges private sector role in AML initiative

Khaleej Times - 31/12/2006

(MENAFN - Khaleej Times) DUBAI — Praising the Middle East countries for the progress made in anti-money laundering (AML) initiatives, the US government urged the private sector in the region to increase their vigilance on this illegal activity that accounts for almost five per cent of the world's gross domestic product or $1.5 trillion per annum.

Stuart Levey, US Under Secretary for Terrorism and Financial Intelligence, said the Middle East and North African region has made significant progress as several countries have made strides in developing and implementing anti-money laundering and terrorist financing regimes. "However, we need to build on these successes by ensuring the infrastructure and expertise to maintain and develop such systems."

The US official said anti-money laundering initiatives in the Middle East and North Africa are at a cross-roads. "The business and policy decisions made by government regulators and financial institutions in the region will play a crucial role in protecting the world's financial system from abuse."

Levey said the creation of the MENA-FATF (Middle East/North Africa Financial Action Task Force) and the commitment of its members to work towards compliance with the comprehensive set of international standards is another important achievement. "The work of that organisation will translate into stronger controls, greater transparency in the financial system, and, in turn, a more attractive venue for business." Money laundering activities as estimated by IMF accounts for between two and five per cent of the world's gross domestic product or roughly between $590 billion and $1.5 trillion per annum. "This level of criminal usage threatens the reputation of national financial systems and subsequently hinders a country's acceptance into the global economy. In specific, the booming financial markets within the Middle East region are not secure from such threats."

He noted that with the formation of MENA FATF, respective national economies within the region are vigorously incorporating anti-money laundering procedures into their compliance strategies. "In such countries, the obstacles for international trade could prove to be quite challenging. Thus, a completely new mindset and approach is required when dealing with various institutions within the region."

The MENA FATF was launched on November 30, 2004 following a meeting attended by 14 Arab states from the MENA region.

US officials said one of the most important advances made within governments around the world is the new role being played by officials with responsibility for the global financial system. "Counter-terrorism and security policy has traditionally been the responsibility of foreign ministries, defence officials, law enforcement bureaus and intelligence agencies, rather than finance ministers and central bankers. Yet today, we are seeing finance officials working side-by-side with officials in security ministries to meet the government's first responsibility: ensuring the safety of its citizens."

Levey said more and more officials in finance ministries and central banks around the world recognise that it is not enough to stimulate investment, promote open markets and so forth. "For our economic efforts to succeed, for us all to reap the benefits of the global financial system, we must keep it secure from those who threaten its integrity," he said while addressing the recent US-MENA Private Sector Dialogue on Combating Money Laundering and Terrorist Financing in New York.

He said finance ministries and central banks must develop and implement effective programmes to combat these threats, including targeted financial sanctions regimes. "We must monitor the financial activities of known terrorists and proliferators and prohibit their access - and that of their support networks - to the financial system. We must also go beyond simply designating individuals and entities that have been named by UN and proactively identify terrorist supporters that threaten our societies, hold them publicly accountable, isolate them financially and commercially, and ensure that all of their activities, whether seemingly legitimate or illicit, are shut down."

"Over the past two years, we have learned a number of lessons about how best to use financial tools to apply financial pressure and isolate terrorists, proliferators, and others whose goal it is to undermine our security. As a result, we are relying more and more on what we call "targeted" measures, aimed at specific actors engaged in illicit conduct. And, as I will describe, we are working in greater partnership with the private sector. Rather than fighting against their interests and tendencies, we have found a way to form somewhat of a natural alliance," Levey said.

He said when it comes to targeted measures aimed at specific actors and entities that seek to exploit the financial system, "we share common interests and objectives with the private financial community. As governments, we have a responsibility to promote these partnerships with the private sector and provide you with the information you need to help protect the financial system from abuse. Such a partnership allows banks to make informed decisions about the business they choose to do and the business they choose to avoid."

Levey said the US is working hard to develop and enhance ways to share this type of information with the private sector so that financial institutions and others are able to apply their resources and controls effectively. "We are also working to better assist the sector in reporting the critical information required to advance our international security interests."

R. Seetharaman, Deputy CEO, Doha Bank, delivering the keynote address on "Anti-Money Laundering and Combating Financing of Terrorism — GCC Perspective", elaborated on key drivers, which are converting the world into a global village. He said: "While globalisation, consumerism, deregulation and technology are making the world extremely competitive and efficient, even the evil activities have become equally efficient and sophisticated. It is extremely important to realise this and tackle it at global scale. Today money laundering and terror financing is the biggest danger facing the world threatening to damage global peace, harmony and stability. This evil has strong potential to channelise the youth power towards self destruction and destruction of society fabric. Today it is estimated that huge amount of money estimated in trillions is laundered. This needs to be tackled with iron hand."

He said the GCC banking sector has come a long way maturing into a stable financial system. It has progressed well towards implementation of Basel II compliance, much more advanced stage than many developed countries. "Corporate governance environment in GCC is getting evolved and is taken with lot of interest and sincerity. Considering GCC demography, we need to realise that over a period of time, various informal system of remittance came into being, providing convenience to migrant workers. A good majority of migrant workers do not have access to banking in remote locations in their home countries where they need to remit small amounts to take care of family needs."

"This has given rise to non-banking remittance companies, which has been vary useful to poor workers. MENA FATF, duly recognising the regional issues had created a very good beginning by having detailed study of region specific financial transactions which were hitherto not under strict supervision. Steps have since been taken to integrate all forms of financial movements into banking system for proper monitoring and FATF compliance."

Speaking about Qatar's participation in AML drive, Seetharaman said: "Qatar has been a proactive member from the beginning. It has been a regular participant in various international conventions and forums. It has promulgated specific laws for tackling money laundering as well as terrorism financing. Qatar has also established a financial information unit to enhance international cooperation in tracking."

"We can say that while lot needs to be done at international as well as regional level, the GCC states have been showing absolute commitment and sincerity in combating this evil. Various steps include enhancing international cooperation, promulgating appropriate laws, global financial intelligence cooperation, clamp down on terror groups, freezing of assets, technology based monitoring and proactive central bank participation in educating, upgrading and monitoring. All these will go a long way in successfully handling the menace."

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