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

Capacity Enhancement Program Capacity Enhancement Program on Anti-Money Launderingon Anti-Money Laundering

andandCCombating the Financing of Terrorism ombating the Financing of Terrorism

(AML/CFT)(AML/CFT)

March 30, 2005March 30, 2005

Emiko TodorokiEmiko TodorokiThe World BankThe World Bank

AML/CFT AML/CFT – Global Problem, Global Effort -– Global Problem, Global Effort -

Money laundering and terrorist Money laundering and terrorist financing can threaten the security financing can threaten the security and stability, transparency and and stability, transparency and efficiency of financial system.efficiency of financial system.

US $1 Trillion is laundered every US $1 Trillion is laundered every year. year.

Strengthening the AML/CFT regimes Strengthening the AML/CFT regimes is important to prevent money is important to prevent money laundering and terrorist financing.laundering and terrorist financing.

Many Positive Implications! Many Positive Implications!

Enhance financial market integrityEnhance financial market integrity Enhance efficiency and capacity in detection of Enhance efficiency and capacity in detection of

corruption/bribery and financial fraud schemescorruption/bribery and financial fraud schemes Discourage growth of the underground economy, Discourage growth of the underground economy,

including tax evasion and tax avoidanceincluding tax evasion and tax avoidance Increase the tax base and government revenuesIncrease the tax base and government revenues Promote the legitimate private sectorPromote the legitimate private sector Improve financial sector supervision by making Improve financial sector supervision by making

macro-economic date more reliable macro-economic date more reliable Etc.Etc.

Increasing TA NeedsIncreasing TA Needs

Awareness raising Awareness raising Legislative and regulatory frameworkLegislative and regulatory framework FIU FIU Financial sector and non-financial Financial sector and non-financial

businesses and professionsbusinesses and professions Law enforcementLaw enforcement Inter-agency and international Inter-agency and international

cooperationcooperation Etc…Etc…

Lessons Learned from the Lessons Learned from the Policy Dialogue SeriesPolicy Dialogue Series

Strengthening the Collaborative Process to Strengthening the Collaborative Process to build effective AML/CFT regimebuild effective AML/CFT regime

The stakeholders include policymakers, The stakeholders include policymakers, judicial authorities, law enforcement judicial authorities, law enforcement agencies, FIU, financial regulatory and agencies, FIU, financial regulatory and supervisory authorities, FIs, NBFIs, IOs supervisory authorities, FIs, NBFIs, IOs

Dialogues with 24 countries. Dialogues with 24 countries.

Lessons Learned – cont.Lessons Learned – cont.

Importance of an effective Importance of an effective consultative mechanism between consultative mechanism between public and private sectors.public and private sectors.

Discussion Outcome:Discussion Outcome:Strong PPP and more dialogue improve Strong PPP and more dialogue improve

decision making in particular when decision making in particular when authorities understand local conditions authorities understand local conditions and the private sector grasps the and the private sector grasps the AML/CFT regime’s implementation AML/CFT regime’s implementation requirements. requirements.

Then How?Then How?

1.1. Display commitment and political willDisplay commitment and political will2.2. Establish a national coordination Establish a national coordination

groupgroup3.3. Establish an implementation working Establish an implementation working

groupgroup4.4. Issue clear rules, regulations and Issue clear rules, regulations and

guidance notesguidance notes5.5. Launch public awareness campaignsLaunch public awareness campaigns

Then How?Then How?

6.6. Build trustBuild trust

7.7. Develop consultative forumsDevelop consultative forums

8.8. Forge PPP with FIUs and reporting Forge PPP with FIUs and reporting entitiesentities

9.9. Develop a feedback mechanismDevelop a feedback mechanism

10.10. Establish ongoing training for both Establish ongoing training for both public and private sectorspublic and private sectors

1. Display commitment and 1. Display commitment and political willpolitical will

Ensuring true commitment and Ensuring true commitment and resolute political willresolute political will

Demonstrate true commitment in Demonstrate true commitment in many ways – regular meetings with many ways – regular meetings with the private sector, seminars, the private sector, seminars, workshops, dissemination of workshops, dissemination of information (web-site), newsletters, information (web-site), newsletters, awareness raising campaigns. awareness raising campaigns.

2. Establish a national 2. Establish a national coordination groupcoordination group

High-level interagency committee or High-level interagency committee or council to lead a national effort to develop council to lead a national effort to develop an effective AML/CFT regimean effective AML/CFT regime

Multidisciplinary approach (stakeholders)Multidisciplinary approach (stakeholders) Develop a national strategyDevelop a national strategy Facilitate interagency cooperationFacilitate interagency cooperation E.g. National Coordination Committee of E.g. National Coordination Committee of

Malaysia founded in April 2000. 13 Malaysia founded in April 2000. 13 ministries and government agencies, led ministries and government agencies, led by BNM. by BNM.

3. Establish an implementation 3. Establish an implementation working groupworking group

Sublevel committee/working Sublevel committee/working group/task forcegroup/task force

Monitor progress and mechanismMonitor progress and mechanism Led by FIU or another leading Led by FIU or another leading

governmental bodygovernmental body

4. Issue clear rules, regulations 4. Issue clear rules, regulations and guidance notesand guidance notes

Regulators/supervisors should Regulators/supervisors should provide guidance on AML/CFT provide guidance on AML/CFT program requirements (not just program requirements (not just administrative authority!)administrative authority!)

Ensure legal protection/safeguard Ensure legal protection/safeguard provision for the private sectorprovision for the private sector

Develop a risk-based approach for Develop a risk-based approach for financial supervisors and FIsfinancial supervisors and FIs

5. Launch public awareness 5. Launch public awareness campaignscampaigns

Changing the culture and mindset (at Changing the culture and mindset (at many levels including FI employees many levels including FI employees and their clients)and their clients)

Consider local aspectsConsider local aspects Highlight the importance of PPPHighlight the importance of PPP Via media (radio, television), and Via media (radio, television), and

publications (pamphlet, newsletters, publications (pamphlet, newsletters, etc)etc)

6. Build trust6. Build trust

Building mutual rust and confidence Building mutual rust and confidence between public and private sectorbetween public and private sector

How to develop trust?How to develop trust?• Ongoing collaboration with reporting entitiesOngoing collaboration with reporting entities• Open communicationOpen communication• Consultation with the private sectorConsultation with the private sector• Training and TA to the private sectorTraining and TA to the private sector• AML/CFT manuals and guidance notes for the AML/CFT manuals and guidance notes for the

private sector (Lesson 4)private sector (Lesson 4)

7. Develop consultative forums7. Develop consultative forums

Role of professional and industry Role of professional and industry associationsassociations• TrainingTraining• Self-regulationsSelf-regulations• Code of conduct Code of conduct

Organize public-private sector forums – Organize public-private sector forums – new trends and typologies, industry new trends and typologies, industry concerns, etc. concerns, etc.

Organize FI form – share information, find Organize FI form – share information, find a common solution, etc. a common solution, etc.

8. Forge PPP with FIU and 8. Forge PPP with FIU and reporting entitiesreporting entities

Ensuring trustful relationship Ensuring trustful relationship between FIU and reporting entities. between FIU and reporting entities. • On-going dialogue through regular On-going dialogue through regular

meetingsmeetings• Consultation with the private sector Consultation with the private sector • Joint initiatives (seminars, public Joint initiatives (seminars, public

awareness campaigns, etc)awareness campaigns, etc)

9. Develop a feedback 9. Develop a feedback mechanismmechanism

Provide appropriate feedback to the Provide appropriate feedback to the private sectorprivate sector

Different type of feedback – Different type of feedback – typologies, statistics, trends and typologies, statistics, trends and patterns on ML/FT, specific case-patterns on ML/FT, specific case-oriented information, etc.oriented information, etc.

Additional information such as a list Additional information such as a list of terrorist groups, etc. of terrorist groups, etc.

10. Establish ongoing training 10. Establish ongoing training for both public and private for both public and private

sectorssectors

Education, education, education!Education, education, education!

Training, training, training!Training, training, training! Educate all the relevant Educate all the relevant

constituenciesconstituencies Institutionalize the training programInstitutionalize the training program

e.g. Egyptian Banking Institute, etce.g. Egyptian Banking Institute, etc

AML/CFT in PakistanAML/CFT in Pakistan

Draft AML legislationDraft AML legislation Concerned agencies need to build Concerned agencies need to build

their AML/CFT capacity.their AML/CFT capacity. Financial institutions need to comply Financial institutions need to comply

with new regulations.with new regulations. Training will play a key role.Training will play a key role.

Capacity Enhancement Program Capacity Enhancement Program on AML/CFTon AML/CFT

Help build institutional capacity to strengthen Help build institutional capacity to strengthen AML/CFT regime.AML/CFT regime.

Offers tools, skills and knowledge Offers tools, skills and knowledge Gains comprehensive knowledge on AML/CFTGains comprehensive knowledge on AML/CFT Multi-year global program with customized Multi-year global program with customized

deliveries in regions and countriesdeliveries in regions and countries Scaling up the training activities to government Scaling up the training activities to government

officials and financial and designated non-officials and financial and designated non-financial sectors, using the technology if financial sectors, using the technology if appropriate.appropriate.

Country’s lead AML/CFT agency monitor and Country’s lead AML/CFT agency monitor and coordinate the training delivery in various coordinate the training delivery in various government agencies and FIs responsible for government agencies and FIs responsible for AML/CFT. AML/CFT.

Comprehensive Training Course as Comprehensive Training Course as a Base for Capacity Enhancementa Base for Capacity Enhancement

Comprehensive e-learning covering the following 7 Comprehensive e-learning covering the following 7 Modules + 1 for FIs as a self-study or a facilitated on-Modules + 1 for FIs as a self-study or a facilitated on-line courseline course

1.1. Developmental Implications of Money Laundering/Terrorist Developmental Implications of Money Laundering/Terrorist Financing and International StandardsFinancing and International Standards

2.2. Legal System and Legislative Requirements in Meeting International Legal System and Legislative Requirements in Meeting International AML/CFT StandardsAML/CFT Standards

3.3. Regulatory and Institutional Requirements for AML/CFT ComplianceRegulatory and Institutional Requirements for AML/CFT Compliance4.4. Building an Effective Financial Intelligence UnitBuilding an Effective Financial Intelligence Unit5.5. International and Inter-agency CooperationInternational and Inter-agency Cooperation6.6. Combating the Financing of TerrorismCombating the Financing of Terrorism7.7. Investigating Money Laundering and Terrorist FinancingInvestigating Money Laundering and Terrorist Financing 8.8. AML/CFT Compliance for Financial InstitutionsAML/CFT Compliance for Financial Institutions

Module on Module on AML/CFT Compliance AML/CFT Compliance for Financial Institutionsfor Financial Institutions

Summary of ContentSummary of Content

1.1.            Understanding what money laundering & terrorist financing Understanding what money laundering & terrorist financing is all aboutis all about

2.2.            Understanding the international BackgroundUnderstanding the international Background 3.3.            Key elements of an AML / CFT policyKey elements of an AML / CFT policy 4.4.            Customer Due DiligenceCustomer Due Diligence 5.5.            Risk based approach to AML/CFT controlsRisk based approach to AML/CFT controls 6.6.            Risk ManagementRisk Management 7.7.            Identification of suspicious transactions / activityIdentification of suspicious transactions / activity 8.8.            Reporting of suspicious transactions / activityReporting of suspicious transactions / activity 9.9.            Monitoring & screening of customers & transactionsMonitoring & screening of customers & transactions 10.10.    Record KeepingRecord Keeping 11.11.    Training & awarenessTraining & awareness 12.12.    Compliance & LegalCompliance & Legal 13.13.    Audit FunctionAudit Function  

Overview of the ProgramOverview of the Program

There are 4 phases:There are 4 phases:

Phase 1: Training of trainers Phase 1: Training of trainers

Phase 2: Distance learning course Phase 2: Distance learning course Phase 3: Action PlanPhase 3: Action Plan

Phase 4: Global ConferencePhase 4: Global Conference

Phase 1: Training of TrainersPhase 1: Training of Trainers

Face-to-face workshopFace-to-face workshop Focus on reviewing the training course and Focus on reviewing the training course and

customizing the program to the specific customizing the program to the specific needs of a country or regionneeds of a country or region

Workshop for trainers from FIUs, Financial Workshop for trainers from FIUs, Financial regulators/supervisors, Prosecutors and regulators/supervisors, Prosecutors and Law enforcement, etc. Law enforcement, etc.

Need nomination of the trainers from Need nomination of the trainers from relevant government agencies.relevant government agencies.

Phase 2: Distant Learning CoursePhase 2: Distant Learning Course

Reaching out to more participants.Reaching out to more participants. Provides an opportunity to interact with Provides an opportunity to interact with

experts and colleagues from the region. experts and colleagues from the region. Community of Practice where Community of Practice where

participants continue a discussion via e-participants continue a discussion via e-mail or on-line to pose questions and mail or on-line to pose questions and exchange information.exchange information.

Trainers play a key role in facilitating. Trainers play a key role in facilitating.

Phase 2: Distant Learning CoursePhase 2: Distant Learning Course

Audience:Audience: Policy makers, regulators, Policy makers, regulators, financial supervisory authorities, prosecutors, law financial supervisory authorities, prosecutors, law enforcement officials, Financial Intelligence Unit enforcement officials, Financial Intelligence Unit staff, and financial institution compliance staffstaff, and financial institution compliance staff

Delivery Mode:Delivery Mode: A blend of e-learning and A blend of e-learning and videoconference sessions to provide a live videoconference sessions to provide a live discussions.discussions.

Duration:Duration: Expected to complete one module Expected to complete one module per week but can be flexible. per week but can be flexible.

Language:Language: English and other languages if English and other languages if necessary.necessary.

Phase 3: Action PlanPhase 3: Action Plan

Develop an action plan (short-term and long Develop an action plan (short-term and long term)term)

Strategy on delivering training where trainers Strategy on delivering training where trainers are expected to deliver the training course to are expected to deliver the training course to their own staff or covered institutions. their own staff or covered institutions.

Needs assessment on technical assistance Needs assessment on technical assistance and trainingand training

Advisory and other assistance by experts Advisory and other assistance by experts during the course of implementing the action during the course of implementing the action planplan

Phase 4: Global ConferencePhase 4: Global Conference

Global conference (face-to-face) in 2007 Global conference (face-to-face) in 2007 (expected)(expected)

Bring together representatives of all the Bring together representatives of all the countries who participated in the programcountries who participated in the program

Share experiences in implementing the Share experiences in implementing the action plans action plans

Report the lessons learned and challenges Report the lessons learned and challenges facedfaced

ContactContact

Ms. Emiko TodorokiMs. Emiko Todoroki

Finance and Private Sector Group, World Bank Institute/Finance and Private Sector Group, World Bank Institute/

Financial Market Integrity Unit, World BankFinancial Market Integrity Unit, World Bank

Tel: 1 202 458 9466, Fax: 1 202 676 9874Tel: 1 202 458 9466, Fax: 1 202 676 9874

E-mail: [email protected]: [email protected]