Please provide a summary of the major successes and failures (impact) of the FATF anti-terrorism financing efforts (i.e., the Financial Action Task Force on Money Laundering established in 1989 by the G7).
FATF publishes measures that can be followed and seem to be a valuable resource for individual countries' further battle plans when it comes to tackling terrorist financing. One big failure of the FATF was the leak of Panama Papers in April 2016 that identified 214,000 offshore entities in 21 jurisdictions all over the world. Often, the FATF's effort have inconclusive or mixed reviews. For example, in April 2017, FATF published an assessment of Sweden’s anti-money laundering and counter-terrorist system saying that their national policy needs improvement. It is unclear how much of Sweden's success can be credited to FATF's measures versus how much is based on Sweden's national efforts to combat terrorist financing. Countries like Ireland have followed the FATF guidelines and have found it to be a valuable resource for tackling terrorist financing. Below you will find detail of successful and failed efforts of the FATF's anti-terrorism financing efforts.
OVERVIEW OF FATF
The FATF combats anti-terrorism financing efforts by measuring legal frameworks at great length which has proven to have a lot of flaws in the past. The biggest role FATF has in the international community is evaluating its Member States: "During an evaluation, a team of diverse experts from the other FATF Member States assesses a country's national anti-money laundering and anti-terrorist financing framework. The evaluation reports are an important source for countries and financial institutions in ascertaining how a national framework has been set up." These evaluations lead to institutions such as banks knowing which countries can be trusted when it comes to money transactions, and give the international community an overview of the global terrorist layout when it comes to money laundering. Recently the Financial Action Task Force (FATF) started moving from checkbox and rules-based regulatory models to an outcome or principle-based approaches which led to a more proactive approach.
The current blacklist of countries at risk of money laundering includes "countries such as North Korea and Iran, but does not include jurisdictions such as Panama or the Bahamas".
A report from August 2017 shows that one of the most developed countries in the world Australia served as "a money laundering probe". Commonwealth Bank of Australia ended up in the news because of a series of scandals that revealed that Australian banks have been lagging when it comes to reaching the global benchmarks in money-laundering fighting for years. This could be seen as a major shortcoming of FATF considering Australia should be one of the leading countries in battling terrorism funding.
In May 2017, Singapore was revealed as the new haven for money laundering. Singapore is now known as the "new Switzerland" based on the fact that there is a "less developed understanding of the risk of illicit flows into and out of Singapore." The emergence of new havens for illicit fund flows shows FATF still has a hard time keeping tabs on some countries.
Nigeria has "consistently ignored and reneged on its commitment" to make the Nigeria Financial Intelligent Unit, which should fight financial crime, "independent of government interference as provided under Recommendation 29 of the International Standard set by the Financial Action Task Force (FAFT)". Recently FATF has had issues with Nigeria as corrupt governance lead to lesser ability to trace terrorism funding for Boko Haram, a Jihadist militant organization based in northeastern Nigeria. "Despite a change of government in Nigeria, there is little evidence that the Buhari administration is indeed committed to change".
Another big shortcoming of FATF was the leak of Panama Papers in April 2016 that "identified 214,000 offshore entities in 21 jurisdictions, all over the world. The documents highlighted the intricate structures that are used for legal and illegal activity, including tax avoidance, tax evasion, corruption, sanctions evasion, terrorist financing and other predicate offenses for money laundering." While the leak showed just how much work is still to be made by FATF and the international community, it also provided an opportunity for "renewed interest by the G20 and others to fully implement the FATF Standards and ensure countries take action to improve the availability of beneficial ownership information."
A critique from 2012 allows us to assess the past system. In 2012, an organization called Global Witness stated the following about FATF's measures: "The current methodology is skewed towards measuring legal frameworks, in minute detail and great length. As many of those involved in FATF have acknowledged, mutual evaluation reports have grown longer and more technical as the evaluation rounds have progressed. In some senses they have fallen down the proverbial rabbit hole, and are failing to provide stakeholders such as financial institutions with what they need in order to assess risk — clear, accurate information on the effectiveness of the AML system in a particular country with a prioritized list of follow up actions."
When the 2012 critique is compared with a 2017 article based out of the UK, it shows just how much FATF has evolved: "Inter-governmental bodies in the AML/TF and ABC environment such as the Financial Action Task Force (FATF) are also raising the bar and moving from checkbox and rules-based regulatory models to outcome or principle-based approaches, providing for risk management within a Risk Appetite Framework (RAF). This new offense introduces a further level of compliance and a concomitant risk burden for businesses, and it is predicted to become the “gold standard” for other governments wishing to follow suit."
Another example of FATF's reporting being helpful is this year's report on Ireland published in September 2017. n the report FATF notices that "Ireland prioritizes counter-terrorism efforts and has secured terrorism-related convictions but it should more actively pursue the prosecution of terrorist financing". By following approach the FATF published seems to be a valuable resource for individual countries' further battle plans when it comes to tackling terrorist financing.
MIXED OR INCONCLUSIVE IMPACTS
During 2016, Pakistan served as one of the countries that provided a haven to terrorists. Pakistan was at the same time listed as “an important counterterrorism partner”. Judging by this measure taken by FATF and the corresponding results, it is unclear whether the removal of Pakistan from the task force watch list had any effect on Pakistan trying to become more efficient in battling terrorism financing. In a report titled “Country Reports on Terrorism, 2016” from July 2017, it is stated that Pakistan was removed from the Financial Action Task Force's watch list because the progress Pakistan showed regarding countering the financing of terrorism was deemed sufficient. However, this action from Financial Action Task Force (FATF) and removing Pakistan from its review did not stop Pakistan from financing terrorism.
In a report from June 2017, it is reported that FATF took initial steps to remove Iran from its watch last, which again led to questionable results. It is yet to be seen whether lifting the sanctions on Iran will lead to any positive results coming from the country's government battling terrorism financing. The lifting of sanctions was implemented in June 2017 and lasts for 12 months.
According to an academic article from February 2017, defunding the Islamic State of Iraq and Syria that was led by FATF and the UN that was done in order to combat terrorism funding has been somewhat held back by individual member states. Especially interesting is the implementation of these measures in the European Union where "evidence suggests that the implementation of these laws has occurred slowly and is, as yet, incomplete. This slow implementation has primarily been linked to the differences in the perceived threats of a terrorist attack among member states, as nations who view an attack as unlikely are susceptible to become ‘free-riders’ in order to avoid bearing the costs of implementation."
FATF conducts reports on countries' individual progress when it comes to combating money laundering and terrorist financing. In April 2017, FATF published an assessment of Sweden’s anti-money laundering and counter-terrorist financing system that showed "Sweden has a strong regime to tackle the money laundering and terrorist financing risks it faces, but needs to improve its national policy coordination". It is unclear how much of this success can be credited to FATF's measures and how much is based on Sweden's national efforts to combat terrorist financing.
Financial Action Task Force battles terrorism financing by providing guidelines for countries and publishing evaluations of individual countries' efforts in combating terrorism financing on a national level. The reports serve as a useful checklist for countries to know what to focus on in the future. However, other efforts of FATF such as putting and taking countries off the blacklist has proven to yield questionable results. Moreover, the recent reports such as Panama Papers have shown FATF has a hard time keeping tabs on what is happening globally, and that there are still many havens for money laundering and terrorism funding.