Capacity Enhancement Program on Anti-Money Laundering and C ombating the Financing of Terrorism (AML/CFT)

1. Emiko Todoroki The World Bank Capacity Enhancement Program on Anti-Money LaunderingandCombating the Financing of Terrorism (AML/CFT) March 30, 2005

2. AML/CFT – Global Problem, Global Effort - • Money laundering and terrorist financing can threaten the security and stability, transparency and efficiency of financial system. • US $1 Trillion is laundered every year. • Strengthening the AML/CFT regimes is important to prevent money laundering and terrorist financing.

3. Many Positive Implications! • Enhance financial market integrity • Enhance efficiency and capacity in detection of corruption/bribery and financial fraud schemes • Discourage growth of the underground economy, including tax evasion and tax avoidance • Increase the tax base and government revenues • Promote the legitimate private sector • Improve financial sector supervision by making macro-economic date more reliable • Etc.

4. Increasing TA Needs • Awareness raising • Legislative and regulatory framework • FIU • Financial sector and non-financial businesses and professions • Law enforcement • Inter-agency and international cooperation • Etc…

5. Lessons Learned from the Policy Dialogue Series • Strengthening the Collaborative Process to build effective AML/CFT regime • The stakeholders include policymakers, judicial authorities, law enforcement agencies, FIU, financial regulatory and supervisory authorities, FIs, NBFIs, IOs • Dialogues with 24 countries.

6. Lessons Learned – cont. • Importance of an effective consultative mechanism between public and private sectors. • Discussion Outcome: Strong PPP and more dialogue improve decision making in particular when authorities understand local conditions and the private sector grasps the AML/CFT regime’s implementation requirements.

7. Then How? • Display commitment and political will • Establish a national coordination group • Establish an implementation working group • Issue clear rules, regulations and guidance notes • Launch public awareness campaigns

8. Then How? • Build trust • Develop consultative forums • Forge PPP with FIUs and reporting entities • Develop a feedback mechanism • Establish ongoing training for both public and private sectors

9. 1. Display commitment and political will • Ensuring true commitment and resolute political will • Demonstrate true commitment in many ways – regular meetings with the private sector, seminars, workshops, dissemination of information (web-site), newsletters, awareness raising campaigns.

10. 2. Establish a national coordination group • High-level interagency committee or council to lead a national effort to develop an effective AML/CFT regime • Multidisciplinary approach (stakeholders) • Develop a national strategy • Facilitate interagency cooperation • E.g. National Coordination Committee of Malaysia founded in April 2000. 13 ministries and government agencies, led by BNM.

11. 3. Establish an implementation working group • Sublevel committee/working group/task force • Monitor progress and mechanism • Led by FIU or another leading governmental body

12. 4. Issue clear rules, regulations and guidance notes • Regulators/supervisors should provide guidance on AML/CFT program requirements (not just administrative authority!) • Ensure legal protection/safeguard provision for the private sector • Develop a risk-based approach for financial supervisors and FIs

13. 5. Launch public awareness campaigns • Changing the culture and mindset (at many levels including FI employees and their clients) • Consider local aspects • Highlight the importance of PPP • Via media (radio, television), and publications (pamphlet, newsletters, etc)

14. 6. Build trust • Building mutual rust and confidence between public and private sector • How to develop trust? • Ongoing collaboration with reporting entities • Open communication • Consultation with the private sector • Training and TA to the private sector • AML/CFT manuals and guidance notes for the private sector (Lesson 4)

15. 7. Develop consultative forums • Role of professional and industry associations • Training • Self-regulations • Code of conduct • Organize public-private sector forums – new trends and typologies, industry concerns, etc. • Organize FI form – share information, find a common solution, etc.

16. 8. Forge PPP with FIU and reporting entities • Ensuring trustful relationship between FIU and reporting entities. • On-going dialogue through regular meetings • Consultation with the private sector • Joint initiatives (seminars, public awareness campaigns, etc)

17. 9. Develop a feedback mechanism • Provide appropriate feedback to the private sector • Different type of feedback – typologies, statistics, trends and patterns on ML/FT, specific case-oriented information, etc. • Additional information such as a list of terrorist groups, etc.

18. 10. Establish ongoing training for both public and private sectors Education, education, education! Training, training, training! • Educate all the relevant constituencies • Institutionalize the training program e.g. Egyptian Banking Institute, etc

19. AML/CFT in Pakistan • Draft AML legislation • Concerned agencies need to build their AML/CFT capacity. • Financial institutions need to comply with new regulations. • Training will play a key role.

20. Capacity Enhancement Program on AML/CFT • Help build institutional capacity to strengthen AML/CFT regime. • Offers tools, skills and knowledge • Gains comprehensive knowledge on AML/CFT • Multi-year global program with customized deliveries in regions and countries • Scaling up the training activities to government officials and financial and designated non-financial sectors, using the technology if appropriate. • Country’s lead AML/CFT agency monitor and coordinate the training delivery in various government agencies and FIs responsible for AML/CFT.

21. Comprehensive Training Course as a Base for Capacity Enhancement • Comprehensive e-learning covering the following 7 Modules + 1 for FIs as a self-study or a facilitated on-line course • Developmental Implications of Money Laundering/Terrorist Financing and International Standards • Legal System and Legislative Requirements in Meeting International AML/CFT Standards • Regulatory and Institutional Requirements for AML/CFT Compliance • Building an Effective Financial Intelligence Unit • International and Inter-agency Cooperation • Combating the Financing of Terrorism • Investigating Money Laundering and Terrorist Financing • AML/CFT Compliance for Financial Institutions

22. Module on AML/CFT Compliance for Financial Institutions Summary of Content • 1.Understanding what money laundering & terrorist financing is all about • 2.Understanding the international Background • 3.Key elements of an AML / CFT policy • 4.Customer Due Diligence • 5.Risk based approach to AML/CFT controls • 6.Risk Management • 7.Identification of suspicious transactions / activity • 8.Reporting of suspicious transactions / activity • 9.Monitoring & screening of customers & transactions • 10.Record Keeping • 11.Training & awareness • 12.Compliance & Legal • 13.Audit Function

23. Overview of the Program • There are 4 phases: Phase 1: Training of trainers Phase 2: Distance learning course Phase 3: Action Plan Phase 4: Global Conference

24. Phase 1: Training of Trainers • Face-to-face workshop • Focus on reviewing the training course and customizing the program to the specific needs of a country or region • Workshop for trainers from FIUs, Financial regulators/supervisors, Prosecutors and Law enforcement, etc. • Need nomination of the trainers from relevant government agencies.

25. Phase 2: Distant Learning Course • Reaching out to more participants. • Provides an opportunity to interact with experts and colleagues from the region. • Community of Practice where participants continue a discussion via e-mail or on-line to pose questions and exchange information. • Trainers play a key role in facilitating.

26. Phase 2: Distant Learning Course • Audience:Policy makers, regulators, financial supervisory authorities, prosecutors, law enforcement officials, Financial Intelligence Unit staff, and financial institution compliance staff • Delivery Mode:A blend of e-learning and videoconference sessions to provide a live discussions. • Duration:Expected to complete one module per week but can be flexible. • Language: English and other languages if necessary.

27. Phase 3: Action Plan • Develop an action plan (short-term and long term) • Strategy on delivering training where trainers are expected to deliver the training course to their own staff or covered institutions. • Needs assessment on technical assistance and training • Advisory and other assistance by experts during the course of implementing the action plan

28. Phase 4: Global Conference • Global conference (face-to-face) in 2007 (expected) • Bring together representatives of all the countries who participated in the program • Share experiences in implementing the action plans • Report the lessons learned and challenges faced

29. Contact Ms. Emiko Todoroki Finance and Private Sector Group, World Bank Institute/ Financial Market Integrity Unit, World Bank Tel: 1 202 458 9466, Fax: 1 202 676 9874 E-mail: etodoroki@worldbank.org