7 Conclusions

International Monetary Fund
Published Date:
June 2004
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Fius are an essential component of the international fight against money laundering, the financing of terrorism, and related crime. Their ability to transform data into financial intelligence is a key element in the fight against money laundering and the financing of terrorism. The place of FIUs is now well established in the arsenal of measures to combat these serious crimes. Yet FIUs face a number of challenges.

Two general challenges appear as constants in the design of FIUs and the improvement of existing ones. The first is that there is no set formula to make an FIU work. Each FIU must be tailored to the specific situation of the country in which it is located. Factors such as the structure and relative importance of financial crime in the country, the government’s objectives in combating this form of criminality, the resources available for the task, and the legal and administrative systems of the country all have to be taken into consideration in designing an FIU or proposing measures to improve the performance of an existing one. As this handbook has demonstrated, on many issues of FIU design, many solutions are possible and none is inherently better than the others.

Establishment of an FIU that can carry out the three core functions of receiving suspicious-transaction and other reports, analyzing them, and disseminating financial intelligence has recently become the subject of an international standard and is encouraged in a number of recent international conventions dealing with financial crime. Nevertheless, the standard is expressed in very broad terms, and authorities in each country must have a clear vision of their own policy objectives and of the local and regional context when they design an FIU that will meet the standard. And beyond complying with the standard, each country needs to ensure that its FIU makes the contribution that it can to the successful functioning of the AML/CFT system as a whole.

The second challenge is, paradoxically, change. In the many countries that have established FIUs over the past ten years or so, change has been evident, with their FIU having had to establish themselves as credible organizations capable of dealing with financial institutions and other reporting entities, other government agencies, and international counterparts, changing traditional relationships between economic agents and law-enforcement organizations in the process.

Change will continue to be a feature of the work of FIUs in the future. Although the adoption of the new FATF Recommendations in 2003 may signal a temporary stabilization of the standards applicable to FIUs themselves, other aspects of the fight against money laundering will continue to evolve. Not the least of these is the behavior of criminals. Criminal behavior is like a stream of water, following gravity and constantly prodding the banks for weak points through which it can spread further. As defenses are set up in the supervised financial sector, criminals may move their funds deeper underground or through other, less regulated sectors of the economy. Similarly, as some countries take decisive steps to strengthen their legal and administrative systems to deal with financial crime, criminals may move some of their operations to countries that have not yet done so. There is a need to be constantly on the lookout to counter changes in patterns of criminal behavior.

Against this general background, FIUs currently face more specific challenges. The most important ones are the integration of the financing of terrorism in their work, the broadening of the suspicious-transaction-reporting obligation beyond the regulated financial sector, and the quest for improved international cooperation.

For countries fortunate enough not to have had to deal with terrorism in the past, the addition of combating the financing of terrorism to the scope of the FIU’s functions presents special challenges. Terrorism is, in many ways, different from money laundering. Terrorism is traditionally not considered a profit-motivated crime; and although significant sums of money may be involved in the commission of terrorist acts, the objective of depriving criminals of the profits of their illegal activity, which is at the heart of an anti-money- laundering strategy, does not apply directly to terrorism. Also, in many countries, the agencies involved in combating terrorism are not the same ones dealing with money laundering, thus requiring FIUs to develop new relationships with the former. (In countries that have already faced terrorism, the basic elements needed to combat it may be in place, and the addition of combating the financing of terrorism to the FIU’s functions may be more easily integrated.)

The second specific challenge faced by FIUs is the broadening of the reporting obligation (and other preventive obligations) to entities beyond the prudentially regulated financial institutions. The extension of the reporting obligation to casinos; dealers in high-value goods; and, more recently, the accounting and legal professions has had a number of implications for FIUs. Some of these professions, such as casinos may be highly regulated in some countries but not in others. Some may not be regulated beyond the basic requirements of incorporation, as may be true of car dealers. Considerable outreach resources are likely to be needed to bring such professions up to an acceptable level of compliance with the reporting requirements. The nature of the reports provided by accounting and legal professionals are bound to be very different from those provided by financial institutions. Complex company structures and trust arrangements require specialized expertise to unravel. Resources have to be allocated to this type of work, and difficult decisions may need to be made as to the balance of resources to be devoted to these new types of reports as compared with the more traditional types.

The third specific challenge is the need to improve the ability of FIUs to engage in international cooperation. The dynamic growth in FIUs worldwide over the last fifteen years has been accompanied by a strong growth in international cooperation between FIUs. The ability of the more than 80 FIUs to network and share financial intelligence based on agreed principles of information exchange has served as a formidable mechanism for fighting financial crime worldwide. Despite the achievements to date in this area, significant challenges lie ahead. In particular, removing legal obstacles that remain in the way of information sharing and developing and improving systems to ensure the confidentiality of exchanged information remain crucial challenges.

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