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Financial Action Task Force Adopts New Standards on Proliferation Financing, and advances work on COVID-19 AML/CFT Risks, and Trade-Based Money Laundering

WASHINGTON – The Financial Action Task Force (FATF) concluded its 32nd plenary meeting on Friday, October 23, by agreeing to revise its standards to further strengthen the global response to the financing of proliferation related to weapons of mass destruction. This week’s endorsement of the new standard is a result of an initiative that began under the U.S. FATF Presidency and Finance Ministers of FATF members adopted in 2019. The FATF also continued its focus on the impact of the COVID-19 pandemic on detecting and countering fraud including attempts to defraud government backed stimulus programs. The task force also adopted an updated report on trade-based money laundering and recognized progress by a number of jurisdictions in rectifying their AML/CFT deficiencies.

“The collaboration of the FATF is vital to addressing global illicit financial activity, including fraud associated with the COVID-19 pandemic, proliferation financing risk, and other AML/CFT priorities,” said Secretary Steven T. Mnuchin.

FATF ADOPTS REVISIONS TO STANDARDS ON PROLIFERATION FINANCING

The Financial Action Task Force adopted amendments to Recommendation 1 and its Interpretive Note to require countries and the private sector to assess and mitigate proliferation financing risks. The FATF has defined “proliferation financing risk” to be the potential breach, non-implementation or evasion of United Nations (UN) targeted financial sanctions related to proliferation financing.

We have seen North Korea and Iran establish complex and elaborate networks, including front and shell companies incorporated in many FATF member jurisdictions, to evade U.S. and UN financial sanctions and to access and move funds to further their dangerous purposes. While the U.S. has already issued a risk assessment on proliferation financing, and U.S. financial institutions and other U.S. businesses are generally already assessing and mitigating sanctions evasion risk related to North Korea and Iran, identifying and disrupting these sophisticated networks is a global challenge. With these enhancements to the FATF standards, jurisdictions around the world will arm their financial institutions and other covered entities with targeted information on proliferation financing risk that can be used to detect shell companies and other individuals or entities acting on behalf of designated persons.

FATF ISSUES UPDATED INFORMATION FOR COUNTRIES ON AML/CFT RISKS AND POLICY RESPONSES TO COVID-19

The FATF is releasing an update on risk information and recent case studies demonstrating how criminals have been taking advantage of the COVID-19 pandemic with an increase in counterfeiting, cybercrime and fraud related to stimulus measures. The U.S. will continue to actively identify and assess how criminals are exploiting the pandemic to take swift enforcement action against these illicit actors, and mitigate these risks to the public.

FATF ADOPTS REPORT ON THE TRENDS AND DEVELOPMENT OF TRADE-BASED MONEY LAUNDERING

The FATF Plenary adopted a new report on Trade Based Money Laundering (TBML), which it will publish in the near-future. The report provides an update on new trends and developments since the previous work of the FATF Global Network on this topic from 2006-2012. The report aims to assist both the public and private sectors to better identify and disrupt TBML activity using a risk-based approach. The report will also serve as a practical tool for governments to develop specific measures and practices to overcome the numerous challenges associated with pursing this complex form of money laundering.

FATF UPDATES THE FINANCING OF ISLAMIC STATE IN IRAQ AND THE LEVANT (ISIL), AL-QAEDA AND AFFILIATES

The FATF continues to monitor the serious terrorist financing threat posed by ISIL, AQ, and affiliates of those terror groups. Updated information gathered from FATF members and its global networks are shared with operational authorities to counter this risk though various law enforcement, security, information exchanges and implementation of sanctions against terrorist facilitators and financiers.

FATF REMOVES JURISDICTIONS FROM ITS GREY-LIST

Iceland and Mongolia are no longer subject to public identification and increased monitoring by the FATF following successful on-site visits in September and early October, respectively. The FATF was satisfied that Iceland and Mongolia were implementing their action plan and there was political commitment to continue the positive momentum. The United States recognizes the significant progress achieved by Mongolia and Iceland to implement AML/CFT reforms, particularly during the challenging COVID pandemic.
 
Outcomes of the FATF Plenary, 23 October 2020
The Financial Action Task Force (FATF) is an international policy-making and standard-setting body, headquartered in Paris, dedicated to combating money laundering and the financing of terrorism and proliferation finance. Treasury’s Deputy Assistant Secretary for Terrorist Financing and Financial Crimes leads the U.S. delegation to FATF.

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