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p. 3 of 19 BACK | NEXT I. Executive Summary II. The Policy Context A. The Impetus for an Anti-Money Laundering/Combating the Financing of Terrorism Policy B. Money Laundering C. Financing of Terrorism D. Negative Effects of Money Laundering III. International Efforts to Combat Money Laundering and the Financing of Terrorism IV. The Policy V. Implementing the Policy VI. Recommendation

Enhancing the Asian Development Bank's Role in Combating Money Laundering and the Financing of Terrorism : II. The Policy Context

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A. The Impetus for an Anti-Money Laundering/Combating the Financing of Terrorism Policy

1. Over the past several years, the international community has become increasingly concerned about the growing problem of money laundering (ML) and the financing of terrorism (FT). The September 11, 2001 terrorist attacks in the United States revealed that a pervasive international financial network was engaged in the FT. ML and FT constitute global problems affecting both developed countries and developing member countries (DMCs), but assistance in combating these financial crimes is urgently needed by many DMCs. ML and FT have transnational elements, as they are frequently characterized by the movement of money or value between jurisdictions. The international community’s concern with the growing incidence of ML and FT arises from the fear that they could seriously jeopardize the integrity of national financial systems and hamper economic development including strategies for poverty reduction.

2. The Asian Development Fund Donors’ meeting in September 2000 requested the Asian Development Bank (ADB) to prepare a policy paper proposing an increased role for ADB in anti-money laundering (AML). In the context of its mandate to promote good governance, ADB was one of the first multilateral development banks to address the ML problem, directly and indirectly, through regional and country assistance programs.

3. Since the September 11 attacks, the international community, led by the United Nations (UN) and the Financial Action Task Force on Money Laundering (FATF),¹ has initiated a number of measures for combating the financing of terrorism (CFT), in addition to those already in place for AML. The International Monetary Fund (IMF) and the World Bank have also taken a number of steps towards supporting the work of the UN and FATF. For its part, ADB has strongly supported and joined the accelerated global efforts for CFT. In November 2001, President Tadao Chino sent a letter to all the Governors of ADB confirming ADB’s support for the efforts against terrorism and its firm commitment to prevent financial and economic support to entities and persons involved in, or who facilitate the work of, terrorist groups. The letter emphasized that ADB’s funds must not be used for or by any entity or individual involved in or supporting the work of terrorist groups. ADB staff have participated actively in several international meetings convened by FATF, the Asia/Pacific Group on Money Laundering (APG), the Association of Southeast Asian Nations, and the Asia-Pacific Economic Cooperation to consider accelerated and stronger measures for CFT.

4. This paper proposes a policy for an enhanced ADB role in combating ML and FT in the Asian and Pacific region to complement the international efforts already initiated. The proposed policy seeks to confirm and develop ADB’s already established important role in combating ML as part of its overall policies and strategies to assist its DMCs to reduce poverty, strengthen their financial systems, and promote good governance and anticorruption. The Board of Directors discussed the Working-Paper on 13 September 2002.

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