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Anti-Money Laundering Toolkit

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Background

What is Money Laundering and Terrorism Financing?

Briefly described, money laundering is the process by which proceeds from a criminal activity are disguised to conceal their illicit origin. Money laundering has commonly been associated with drug trafficking where drug proceeds are laundered through the financial system or other means. It extends beyond drug trafficking (or drug money laundering) when proceeds of other criminal activities are laundered, such as illegal arms sales and human trafficking.

Terrorist financing, on the other hand, is the provision or collection of funds for the support, advancement or perpetration of acts of terrorism. Such funds include legitimate funds as well as proceeds of criminal activities.

International Law and Standards

The principal initatives in the development of international law and standards involve the work of the United Nations ("UN") and the Financial Action Task Force on Money Laundering ("FATF").

In anti-money laundering and combating the financing of terrorism ("AML/CFT"), the key instruments are:

• the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances* (1988) ("Vienna Convention");
• the International Convention for the Suppression of Financing of Terrorism* (1999) ("SFT Convention");
• the Convention against Transnational Organised Crime (2000) ("Palermo Convention");
• the Convention on Corruption* (2003) ("Merida Convention");
• the UN Security Council Resolution 1267* (1999) and related resolutions;
• the UN Security Council Resolution 1373* (2001);
• the FATF Forty Recommendations on Money Laundering* (2003) ("FATF 40 Recommendations"); and
• the FATF Nine Special Recommendations on Terrorist Financing* (2001) ("FATF Special Recommendations").

While the FATF 40+9 Recommendations do not have the same status as international law instruments such as the UN conventions and the UN Security Council resolutions, and are therefore not legally binding, there are substantial linkages in the themes and underlying policies of the UN instruments and the FATF 40+9 Recommendations.

Additionally, there has been significant emphasis on the implementation of the FATF 40+9 Recommendations through their endorsement by more than 170 countries around the world and by the Executive Boards of the International Monetary Fund (IMF) and the World Bank. This is reinforced through the undertaking of mutual evaluations by the FATF and FATF-styled regional bodies ("FSRBs") and though assessments by the IMF and the World Bank.

Consequently, in considering AML/CFT international law and standards, it is important to have regard to both UN conventions and UN Security Council resolutions and the FATF Recommendations.

Further details on the above instruments can be found in the website of the Global Programme on Money Laundering of the United Nations Office on Drugs and Crime*.

Key Aspects of the International Law and Standards

Countries are expected to have adequate AML/CFT legal frameworks, adequate institutional regimes for implementing AML/CFT requirements, and procedures in place for supporting international cooperation. Specifically they are required to:

• Recognize money laundering and terrorism’s financing as criminal offenses. Countries are required to criminalize the laundering of proceeds of criminal activities and activities relating to financing of terrorism.
• Apply the money laundering offense to a wide range of predicate offenses. This includes corruption-related offenses such as obstruction of justice, bribery of public officials and in the private sector, embezzlement or misappropriation of property, and abuse of functions.
• Institute a comprehensive regulatory and supervisory regime for banks and nonbank financial institutions. Such a regime should have requirements for customer due diligence, record keeping and reporting of suspicious transactions, and adequate regulatory and supervisory capabilities for ensuring compliance with the requirements.
• Ensure that national authorities tasked with AML/CFT responsibilities can cooperate and exchange information at the national and international levels. This should include establishment of a national financial intelligence unit for the collection, analysis, and dissemination of AML/CFT-related information.
• Enable the freezing, seizing, and confiscation of proceeds and instrumentalities of crime and terrorism-related assets. This includes freezing without delay funds and other financial assets of persons and entities designated as persons or entities associated with terrorism.
• Require the detection and monitoring of cross-border movements of cash and negotiable instruments.
• Ensure that countries afford one another the widest forms of cooperation in mutual legal assistance and extradition.

International Organizations*

• Financial Action Task Force on Money Laundering
• International Monetary Fund
• World Bank
• Egmont Group of FIU
• Asia/Pacific Group on Money Laundering
• International Money Laundering Information Network
• United Nations Office on Drugs and Crime
• Eurasian Group
• Council of Europe- Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)

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