Name and Shame? Stronger Tactics Needed to Combat Money Laundering and the Financing of Terrorism

February 22nd, 2010

On Thursday, members of the Financial Action Task Force (FATF) and its regional counterpart, the Middle East and North African Financial Action Task Force (MENA- FATF) convened for a plenary meeting in Abu Dhabi. The end product was a blacklist of 8 countries that have strategic deficiencies in anti-money laundering and combating the financing of terrorism.

Acknowledging the dangers of the illicit financial world is always a welcome development. However, FATF’s inclusion of only 8 countries on this blacklist contrasts sharply with the 60 highlighted by the U.S. State Department’s “Jurisdictions of Primary Concern” list. Indeed, Global Financial Integrity’s own Tom Cardamone stated that “eight countries on the ‘black’ list is woefully short.” Considering the much longer list from the State Department’s report, Mr. Cardamone pointed out that, “the criteria for a country being listed as being cooperative with the FATF are fairly weak.”

Critically, major facilitators of dirty money in the international financial system were noticeably absent from the list. Switzerland, Delaware, Guernsey, and the Caymans – all well-recognized secrecy jurisdictions that contribute to the problems of money laundering and terrorist financing – escaped scrutiny by the FATF.

By its own admission, FATF recognizes that there are more international jurisdictions in need of review and promised more findings later in the year. Alongside the 8-country blacklist, they released a list of 28 countries with significant deficiencies that are currently working with FATF on action plans. But if past events are any indicator, the mere publishing of a list of suggestions and action plans stands little chance of being truly enforced: more needs to be done. Indeed, a similar list was produced in the 2000; despite both it and Thursday’s new list, no country is fully compliant with FATF standards after a decade, as NGO Global Witness points out.

Looking at whether or not countries have laws to combat money laundering and the financing of terrorism is a good first step, but FATF needs to get some teeth. The Financial Action Task Force describes itself as the “global standard setting body for anti-money laundering and combating the financing of terrorism.” If this title is to carry some weight, much more needs to be done in terms of regulatory enforcement mechanisms than another ‘name and shame’ list.

In the last two years, their standards have undergone significant changes, and a strategic shift has been made towards incorporating their recommendations into the legal codes of member countries. However the fact remains that FATF is an intergovernmental body without real power to punish states that do not comply with their standards. In spite of stricter regulatory measures, a blacklist of 8 countries falls short of addressing the true scope of dirty money today.

Written by Kelsey Willingham

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