Paris, 21 October 2021 - The fifth Plenary of the FATF under the German Presidency of Dr. Marcus Pleyer took place on 19-21 October.
Delegates representing the 206 members of the Global Network and observer organisations, such as the IMF, the United Nations and the World Bank met for three days of meetings. After five completely virtual Plenary events due to the COVID-19 pandemic, this Plenary meeting took place in a hybrid format, allowing the limited number of delegates who could travel to meet face-to-face, while the remaining delegations connected virtually. Around the world, many countries are re-opening and focusing on rebuilding economies that have strained under the pressure of this unprecedented health crisis. There is still a long road ahead until every country has fully emerged from the COVID-19 imposed restrictions. Nevertheless, they must continue to fully and effectively implement the risk-based FATF Standards and ensure that criminals and terrorist do not find new and emerging loopholes to exploit
Delegates finalised work in a number of important areas, including an updated guidance for a risk-based approach to virtual assets and virtual asset service providers as well as a final report on survey results on implementation of the FATF Standards on cross-border payments. The FATF finalised a report for government officials that focuses on the digital transformation of AML/CFT for operational agencies.
The Plenary discussed the evolving situation in Afghanistan and issued a statement on the matter. The Plenary also discussed and issued a statement on the risks associated with the financing of ISIL, Al-Qaeda and Affiliates.
Finally, the FATF agreed to release for consultation, the proposed revisions to its Recommendation 24 on beneficial ownership of legal persons to ensure greater transparency about the beneficial ownership of legal persons, and take action to mitigate the risks. The recently released Pandora Papers have highlighted, once again, that not enough is being done to prevent criminals from hiding illicit wealth and activities behind complex corporate structures and in offshore banks. The proposed changes aim to strengthen measures that will prevent criminals from hiding illicit activity and proceeds, including by requiring countries to establish a beneficial ownership registry or use an alternative system that also enables efficient access to beneficial ownership information.
Jurisdictions No Longer Under Increased Monitoring – Botswana and Mauritius
Strengthening the Global Network
The virtual asset (VA) sector is fast-moving and technologically dynamic, which means continued monitoring and engagement between the public and private sectors is necessary. The June 2020 12-Month Review of the Revised FATF Standards on VAs and Virtual Asset Service Providers (VASPs), identified areas requiring greater FATF guidance in order to clarify the application of the revised FATF Standards. As a result, the FATF agreed to revise and update its 2019 Guidance. Following public consultation in March-April this year, the FATF finalised the 2021 Guidance for a Risk-Based Approach to Virtual Assets and VASPs, which explains how the FATF Recommendations apply to these assets and services. In particular, the guidance clarifies the definitions of virtual asset and VASP and builds on the FATF report to the G20 to explain how the FATF Standards apply to stablecoins. It also addresses the risks for peer-to-peer transactions, and illustrates tools to identify and mitigate these risks. The guidance covers the licensing and registration of VASPs, the so-called “travel rule” and includes principles of information-sharing and cooperation amongst VASP supervisors. This updated Guidance is intended to assist countries and the private sector in implementing the current FATF Standards. FATF expects that countries and the private sector will implement FATF standards on VA/VASPs as soon as possible, especially in light of this updated Guidance. The FATF will be vigilant and closely monitor the virtual assets and VASP sector for any material changes that necessitate further revision or clarification of the FATF Standards. This includes in relation to areas such as stablecoins, peer-to-peer, non-fungible tokens and decentralised finance. (To be published on 28 October.)
Faster, cheaper, more transparent, and more inclusive cross-border payment services, that are safe and secure can facilitate economic growth, international trade, global development and financial inclusion. Enhancing cross-border payments is a key priority of the G20. In October 2020 G20 Finance Ministers and Central Bank Governors endorsed the Roadmap for Enhancing Cross-border Payments, which comprises 19 Building Blocks. FATF took the lead on the building block that focused on identifying areas where divergent AML/CFT rules or their implementation cause friction for cross-border payments and initiated an industry survey in consultation with the Basel Committee on Banking Supervision (BCBS). The FATF Plenary adopted the final report on the survey results, which highlights, among others, that lack of risk-based approach and inconsistent implementation of the AML/CFT requirements increases cost, reduces speed, limits access and reduces transparency. Inconsistent national approaches also create obstacles in identifying and verifying customer and beneficial owners, effective screening for targeted financial sanctions, sharing of customer and transaction information where needed, and establishing and maintaining correspondent banking relationships. The FATF will continue its engagement with all stakeholders on this issue. (To be published on 22 October.)
Recent revelations in the Pandora Papers once again underscore the importance of ensuring transparency about the true beneficial ownership of companies to stop criminals from hiding their illicit activities and proceeds behind complex corporate structures. These revelations echo the results of the FATF’s mutual evaluations and other major investigations: countries need to do more to ensure that information on beneficial ownership is available and up to date. In June 2021, the FATF issued a white paper for public consultation on potential amendments in key policy areas to strengthen the requirements of Recommendation 24 on the transparency of beneficial ownership of legal persons. The input received informed proposed changes to the language of Recommendations 24, its interpretive note and the glossary, which the FATF Plenary approved for public consultation.
The FATF Plenary welcomes views on these proposed amendments, which are published on the FATF website, in particular on the multi-pronged approach to collection of beneficial ownership information, measures to prevent the abuse of bearer shares and nominee arrangements, the risk-based approach and access to accurate, adequate and up-to-date information on beneficial ownership by competent authorities.
In February this year, the FATF launched a project to study and mitigate the unintended consequences resulting from the incorrect implementation of the FATF Standards. At this Plenary, the FATF concluded phase 1 of this project, which sought to understand the nature of possible unintended consequences of the FATF Standards. The Plenary agreed to publish results of phase 1, which examines de-risking, financial exclusion, undue targeting of non-profit organisations, and the curtailment of human rights (with a focus on due process and procedural rights). During the next phase of this project, the FATF will identify and consider potential options to mitigate these unintended consequences. (To be published on 22 October 2021.)