policy book on money laundering

1. World Bank
International Standards and Action
to Combat Money Laundering
- Legal Aspects
Mark Butler
Financial Sector Specialist,
Financial Market Integrity, The World Bank
April 16, 2006

2. International Standards to
Combat Money Laundering
 Financial Action Task Force on Money
Laundering (FATF)
 United Nations Conventions
 Basel Committee on Banking Supervision
 Wolfsberg Group

3. FATF 40 + 9 Recommendations
 Set out the legal, institutional and
implementation framework for AML/CFT efforts.
 Designed as minimal standards/best practices
for universal application subject to the local risk,
vulnerabilities and legal framework of the
country.
 Revised to take into account new trends and
threats in the area of money laundering and
terrorist financing

4. Key Elements of an AML Strategy
• Legal
• Prevention
• Detection & Enforcement
• International cooperation

5. Legal
• Creating a legal framework that provides for:
– Criminalising of ML and FT
– Freezing, Seizing and other provisional measures
– Investigative powers
– Forfeiture of Proceeds of Crime & Terrorist Property
– International Cooperation
– Customer Due Diligence
– Establishment of Financial Intelligence Unit
• Effective court system and competent judiciary

6. Prevention
Establishment of Effective Institutional Framework
• Financial Intelligence Unit
• Financial Supervisors - central bank, insurance
commission, securities commission
• Law enforcement agencies - Police, Customs,
Immigration

7. Prevention
Preventative Measures and Supervision
– Comprehensive List of Involved Institutions
– CDD Obligations for Institutions
• KYC - client identification & record retention
• Monitor accounts for unusual activity
• Suspect Transaction Reporting (STR)
• Other types of reporting (CTR, WTR)
– Comprehensive AML Procedures
• Training
• Compliance program
– Supervisory Framework

8. Detection and Enforcement
• Creation of a Financial Intelligence Unit
• Requirement to report suspicious transactions
• Monitoring and Investigation of compliance by
supervisors
• Comprehensive Investigative Powers
• Law enforcement agencies to have requisite powers
• Prosecution of ML & FT
• Forfeiture of proceeds

9. International and Domestic Cooperation
Should be as broad as possible and cover as a
minimum cooperation between:
• Supervisors
• FIUs
• Law Enforcement Agencies
• Supervisor and FIU
• FIU and law enforcement agencies
• Supervisors and law enforcement agencies

10. Assessment of Compliance
• Assessment Methodology compiled by FATF
– 252 Criteria
– Assesses Implementation and Effectiveness
• Assessments can be conducted by either World
Bank, International Monetary Fund or FATF
Styled Regional Bodies

11. Legal Aspects

12. Criminalisation of Money Laundering
• Criminalization on the basis of the 2000 UN
Convention on Transnational Organised Crime
• Intent and Knowledge of the offense
• Should ensure the widest range of coverage of
predicate offenses
• All Offences / List of Offences / Threshold Approach
• Offenses covered should have extraterritorial
application
• Where possible, should incorporate self-
laundering of proceeds

13. Minimum Designated Categories
• Participation in an organized criminal group;
• Terrorism, including terrorism financing;
• Trafficking in human beings and migrant trafficking;
• Sexual exploitation (including of children);
• Illicit trafficking in narcotic drugs;
• Illicit Arms Trafficking;
• Corruption and bribery;
• Illicit trafficking in stolen and other goods;
• Fraud; Forgery; Robbery or theft;
• Counterfeiting currency;
• Counterfeiting and piracy of products;
• Environmental crime;
• Murder, grievous bodily injury;
• Kidnapping, illegal restraint and hostage taking;
• Smuggling Extortion; Piracy;
• Insider trading and market manipulation

14. Criminalization of Terrorist Financing
• Criminalize Terrorist Financing in accordance with
UN International Convention for the Suppression
of the Financing of Terrorism (1999)
• Broad definition of TF
• TF offense must cover any funds (proceeds of
crime & legitimate funds)
• TF offense must be an autonomous offense
• TF must be designated as a ML predicate
offense

15. United Nations Instruments
• Ratify and fully implement the 1999 UN
Convention for the Suppression of the
Financing of Terrorism
• Includes measures to criminalize Financing of
Terrorism, to freeze without delay terrorist funds and
other assets, international cooperation
• Take immediate steps to implement the relevant
UN Security Council Resolutions (UNSCR), in
particular, UNSCR 1373

16. Sanctions
• Criminal liability, and, where that is not
possible, civil or administrative liability, should
apply to legal persons.
• Criminal sanctions (imprisonment, fines & other
penalties) should be available against
individuals and where possible, legal persons
• Sanctions should be effective, proportionate
and dissuasive
• Should not preclude parallel criminal, civil or
administrative proceedings with respect to
legal persons in countries in which such forms
of liability are available.

17. Confiscation Measures
• Measures (including civil forfeiture) for
freezing/restraining, seizing and
forfeiting/confiscating of proceeds of crime,
funds related to terrorist activity including
instrumentalities of crime or terrorist activity.
• Should not affect rights of third parties
• Provision for ability to identify, trace and
evaluate property suspected of being proceeds
of crime or funds related to terrorist activity
• Civil and criminal forfeiture – Burden of proof
different.

18. International Co-operation
• Should ensure provide the widest possible range of
international co-operation to their foreign counterparts,
notwithstanding the absence of dual criminality
• Clear and effective gateways to facilitate the prompt and
constructive exchange between counterparts
• either spontaneously or upon request,
• relating to ML/FT and/or the underlying predicate offence
• without unduly restrictive conditions
• Refusal of assistance should not be on the sole ground
that the request is considered to involve fiscal matters
• Laws that require financial institutions to maintain
secrecy or confidentiality should not be a ground
for refusing to provide co-operation

19. International Co-operation
• Competent authorities should be able to conduct
inquiries; and where possible, investigations on
behalf of foreign counterparts
• Should be able to freeze, seize and confiscate
property pursuant to a foreign request
• Have procedures to extradite persons charged
with ML/FT offences
- If extradition is not possible, country should have
means to prosecute

20. World Bank
International Standards and Action
to Combat Money Laundering
- Legal Aspects
Mark Butler
Financial Sector Specialist,
Financial Market Integrity, The World Bank
April 16, 2006