Catalog

	Table of Contents
p. 11 of 19 BACK | NEXT I. Executive Summary II. The Policy Context III. International Efforts to Combat Money Laundering and the Financing of Terrorism A. Financial Action Task Force on Money Laundering and Affiliated Bodies B. The United Nations C. The Bretton Woods Institutions D. ADB’s Activities in AML 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 : III. International Efforts to Combat Money Laundering and the Financing of Terrorism

---

D. ADB’s Activities in AML

45. ADB’s own recent activities in assisting DMCs to combat ML have been undertaken within the broader context of its existing policies and strategies to facilitate poverty reduction, promote good governance and anticorruption, and strengthen national financial systems. Thus, these activities have been incorporated, as appropriate, as an integral part of ADB’s operational programs and country strategies in a limited number of DMCs that have requested assistance in their efforts to combat ML.

1. Overall Policy Setting

46. Poverty reduction is ADB’s overarching goal. Thus, ADB’s other strategic objectives will be pursued in ways that contribute most effectively to poverty reduction. Good governance has been identified as one of the three pillars of ADB’s poverty reduction strategy. Without good governance, efforts at reducing poverty will not be effective. These principles have been clearly articulated in Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development Bank.¹¹

47. In October 1995, ADB became the first multilateral development bank to adopt a policy on governance. ¹² The policy identified four elements of good governance– accountability, participation, predictability, and transparency–and allowed ADB to integrate governance dimensions more fully into its operations. In addition to supporting poverty reduction efforts, the governance policy became the basic building block for a cluster of good governance approaches, which subsequently included those on procurement, law and policy reform, participation of civil society, anticorruption, and public expenditures.

48. The implementation of ADB’s governance policy was reviewed in October 2000.¹³ The review, which included a detailed analysis of ADB’s projects with a major governance focus since 1995,¹⁴ concluded that ADB had laid the groundwork and had achieved some success. However, the review noted that the more difficult process of changing attitudes and behavior had also begun, and that progress would be slow and difficult. The success of ADB’s efforts would depend largely on appreciation by DMC leadership of the benefits of better governance and their support for the incentives needed to bring about the necessary changes.

2. Loan and Technical Assistance Operations

49. Since the adoption of the governance policy, ADB has become involved, through both its loans and TA, in a fairly wide range of activities in governance. Examples of activities that have a bearing on ADB’s current activities in AML and CFT are those dealing with public financial management; legal system reforms, enhancing capacity to implement laws and supporting private sector development; public accountability through strong anticorruption measures; improvement in accounting and auditing standards; and improving disclosure and transparency. A key element of good governance is strengthening governance in the financial sectors of DMCs. In the aftermath of the Asian financial crisis, ADB’s activities have focused particularly on developing the soundness, safety, and integrity of financial institutions whose vulnerabilities had contributed in no small measure to that crisis. ¹⁵ Sound and healthy financial institutions are key to promoting poverty reduction and economic growth.

50. Initially, ADB’s efforts in assisting DMCs to combat ML have been implemented primarily through its financial sector loan operations in a number of countries. To cite a few examples, under the financial governance reform program loan to Indonesia in 1998,¹⁶ the enactment of legislation to prevent ML was a prerequisite to disbursement of the third tranche. Likewise, the preparation of AML legislation was covenanted under the financial sector program loan to Samoa in 1998.¹⁷ In reviewing amendments to the Offshore Finance Center Act under the comprehensive reform program loan to Vanuatu, ADB’s advice sought to strike a balance between the country's needs to attract genuine investment and the need to avoid a greater risk of ML.¹⁸ For the governance reform program loan to Nepal, ¹⁹ the Government is expected to submit to the Parliament legislation on AML by the third tranche.

51. ADB’s efforts in assisting DMCs to combat ML have also been channeled through three TAs, approved between 2000-2002, that seek to directly assist DMCs in identifying needed institutional and regulatory reforms and strengthening their AML regimes. The following paragraphs give a summary description of these projects.

a. TA 5967-REG: Countering Money Laundering in the Asian and Pacific Region

52. In December 2000, ADB approved regional technical assistance (RETA) to facilitate the adoption and implementation of AML measures based on internationally accepted standards in nine selected DMCs: Cook Islands, Fiji Islands, Indonesia, Marshall Islands, Nauru, Philippines, Samoa, Thailand, and Vanuatu. The RETA identified institutional and regulatory reforms needed in each of the nine countries, taking into account country assessments and evaluations conducted by FATF and APG. It established a comprehensive new web site for APG, and co-organized the 2002 annual meeting of APG in Brisbane, where ADB presented the findings of the RETA. A one-day training program on AML/CFT was conducted for about 30 officials from the nine countries and a few additional DMCs on this same occasion.

b. TA 3847-PHI: Strengthening the Anti-Money Laundering Regime

53. In March 2002, ADB approved TA to the Government of the Philippines for strengthening its AML regime. Building on the work of the RETA, the TA will prepare a time-based plan with milestones for implementing an effective AML regime, prepare a blueprint detailing the design and requirements for a STR system, provide for specialized training for a wide range of key institutions, and undertake and disseminate a background study that clearly and concretely identifies the costs to key constituencies of not establishing an effective AML regime. This project is currently under implementation.

c. TA 3849-INO: Development of an Anti-Money Laundering Regime

54. In March 2002, ADB also approved TA to the Government of Indonesia for the development of an AML regime. It will build on the country-specific legal analysis from the RETA and support Indonesia’s integration into a regional plan for AML. As Indonesia has now adopted a new AML law, the TA will support the next phase of implementing the new law, covering the issuance of implementing regulations, establishment of new institutions mandated by the law, and development of monitoring and database systems, especially for STRs; increase the skills base and institutional capacity necessary for an effective AML regime; and promote public awareness and understanding of ML and of the impact of the new law. This TA is currently under implementation.

d. Other Technical Assistance

55. Another example is TA 3890-PRC: Banking Laws and Regulations, which has a component dealing with laws against financial crimes such as ML. A number of requests for TA from other DMCs are being considered.

11. ADB. 1999. Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development Bank. Manila.
12. ADB. 1995. Governance: Sound Development Management. Manila.
13. ADB. 2000. Promoting Good Governance; ADB’s Medium-Term Agenda and Action Plan. Manila.
14. Ibid. Appendix I: Selected ADB Projects with a Major Governance Focus.
15. In relation to private sector operations, ADB, through the Private Sector Operations Department, follows best practices in the introduction of governance standards, among others (i) at the time of due diligence, (ii) enhancing compliance by borrowers, and (iii) supporting adequate disclosure practices and adoption of international accounting standards.
16. ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Indonesia for the Financial Governance Reforms: Sector Development Program. Manila.
17. ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Samoa for the Financial Sector Program. Manila.
18. ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Vanuatu for the Comprehensive Reform Program. Manila.
19. ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Nepal for the Governance Reform Program Loan. Manila.
    

    ---

    Back C. The Bretton Woods Institutions	Next IV. The Policy