Back Matter

FATF Special Recommendation IX and consequential amendments to FATF Recommendation 19

The Objectives of FATF Special Recommendation IX:

46. FATF Special Recommendation IX was developed with the objective of ensuring that terrorists and other criminals cannot finance their activities or launder the proceeds of their crimes through the physical cross-border transportation of currency and bearer negotiable instruments. Specifically, it aims to ensure that countries have measures:

  • to detect the physical cross-border transportation of currency and bearer negotiable instruments;

  • to stop or restrain currency and bearer negotiable instruments that are suspected to be related to terrorist financing or money laundering;

  • to stop or restrain currency or bearer negotiable instruments that are falsely declared or disclosed;

  • to apply appropriate sanctions for making a false declaration or disclosure; and

  • to enable confiscation of currency or bearer negotiable instruments that are related to terrorist financing or money laundering.

47. Measures to detect the cross-border transportation of currency and bearer negotiable instruments may include either a declaration system or other disclosure obligation.

48. Countries should implement Special Recommendation IX subject to strict safeguards to ensure proper use of information and without restricting either: (i) trade payments between countries for goods and services; or (ii) the freedom of capital movements in any way.11

49. Recommendation 19, as consequentially amended, is also set out below. References to countries considering adopting systems of monitoring the physical cross border movement of cash or bearer instruments have been removed from Recommendation 19 as they now form part of the requirements of SR IX. Provisions on currency transactions remain in Recommendation 19.

Text and Methodology for FATF SR IX and Amended Recommendation 19

Special Recommendation IX. Cash Couriers

Countries should have measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments, including a declaration system or other disclosure obligation.

Countries should ensure that their competent authorities have the legal authority to stop or restrain currency or bearer negotiable instruments that are suspected to be related to terrorist financing or money laundering, or that are falsely declared or disclosed.

Countries should ensure that effective, proportionate and dissuasive sanctions are available to deal with persons who make false declaration(s) or disclosure(s). In cases where the currency or bearer negotiable instruments are related to terrorist financing or money laundering, countries should also adopt measures, including legislative ones consistent with Recommendation 3 and Special Recommendation III, which would enable the confiscation of such currency or instruments.

Methodology for Special Recommendation IX

The essential criteria listed below should be read in conjunction with the text of Special Recommendation IX and its Interpretative Note.

Essential criteria

IX.1 To detect the physical cross-border transportation of currency and bearer negotiable instruments that are related to money laundering or terrorist financing, a country should implement one of the following two systems for incoming and outgoing12 cross-border transportations of currency or bearer negotiable instruments13:

(a) A declaration system that has the following characteristics:

  1. All persons making a physical cross-border transportation of currency or bearer negotiable instruments that are of a value exceeding a prescribed threshold should be required to submit a truthful declaration to the designated competent authorities; and

  2. The prescribed threshold cannot exceed EUR/USD 15,00014

OR

(b) A disclosure system that has the following characteristics:

  1. All persons making a physical cross-border transportation of currency or bearer negotiable instruments should be required to make a truthful disclosure to the designated competent authorities upon request; and

  2. The designated competent authorities should have the authority to make their inquiries on a targeted basis, based on intelligence or suspicion, or on a random basis.

IX.2 Upon discovery of a false declaration/disclosure of currency or bearer negotiable instruments or a failure to declare/disclose them, designated competent authorities should have the authority to request and obtain further information from the carrier with regard to the origin of the currency or bearer negotiable instruments and their intended use.

IX.3 The designated competent authorities should be able to stop or restrain currency or bearer negotiable instruments for a reasonable time in order to ascertain whether evidence of money laundering or terrorist financing may be found:

  1. Where there is a suspicion of money laundering or terrorist financing; or

  2. Where there is a false declaration/disclosure.

IX.4 At a minimum, information on the amount of currency or bearer negotiable instruments declared/disclosed or otherwise detected, and the identification data of the bearer(s) shall be retained for use by the appropriate authorities in instances when:

  1. A declaration which exceeds the prescribed threshold is made; or

  2. Where there is a false declaration/disclosure; or

  3. Where there is a suspicion of money laundering or terrorist financing.

IX.5 Information obtained through the processes implemented in Criterion IX.1 should be available to the financial intelligence unit (FIU) either through:

  1. A system whereby the FIU is notified about suspicious cross-border transportation incidents; or

  2. By making the declaration/disclosure information directly available to the FIU in some other way.

IX.6 At the domestic level, there should be adequate co-ordination among customs, immigration and other related authorities on issues related to the implementation of Special Recommendation IX.

IX.7 At the international level, countries should allow for the greatest possible measure of co-operation and assistance amongst competent authorities, consistent with the obligations under Recommendations 35 to 40 and Special Recommendation V.

Examples of possible measures (drawn from the Best Practices Paper to Special Recommendation IX) include:

  • Having cooperation arrangements with other countries which would allow for bilateral customs-to-customs information exchanges between customs and other relevant agencies on cross-border transportation reports and cash seizures.

  • Ensuring that the information recorded pursuant to criterion IX.4 can be shared internationally with foreign competent authorities in appropriate cases.

IX.8 Countries should ensure that Criteria 17.1 to 17.4 (in R.17) also apply to persons who make a false declaration or disclosure contrary to the obligations under SR IX.

IX.9 Countries should ensure that Criteria 17.1 to 17.4 (in R.17) also apply to persons who are carrying out a physical cross-border transportation of currency or bearer negotiable instruments that are related to terrorist financing or money laundering contrary to the obligations under SR IX.

IX.10 Countries should ensure that Criteria 3.1 to 3.6 (in R.3) also apply in relation to persons who are carrying out a physical cross-border transportation of currency or bearer negotiable instruments that are related to terrorist financing or money laundering.

IX.11 Countries should ensure that Criteria III.1 to III.10 (in SR.III) also apply in relation to persons who are carrying out a physical cross-border transportation of currency or bearer negotiable instruments that are related to terrorist financing.

IX.12 If a country discovers an unusual cross-border movement of gold, precious metals or precious stones, it should consider notifying, as appropriate, the Customs Service or other competent authorities of the countries from which these items originated and/or to which they are destined, and should co-operate with a view toward establishing the source, destination, and purpose of the movement of such items and toward the taking of appropriate action.

IX.13 The systems for reporting cross border transactions should be subject to strict safeguards to ensure proper use of the information or data that is reported or recorded.

Additional elements

IX. 14 Has the country implemented or considered implementing the measures set out in the Best Practices Paper for SR.IX?

IX.15 Where systems for reporting the cross border transportation of currency are in place, are the reports maintained in a computerized data base, available to competent authorities for AML/CFT purposes?

Recommendation 19:

Countries should consider the feasibility and utility of a system where banks and other financial institutions and intermediaries would report all domestic and international currency transactions above a fixed amount, to a national central agency with a computerized data base, available to competent authorities for use in money laundering or terrorist financing cases, subject to strict safeguards to ensure proper use of the information.

Methodology for Recommendation 19

The essential criteria and additional elements listed below should be read in conjunction with the text of Recommendation 19.

Essential criteria

19.1 Countries should consider the feasibility and utility of implementing a system where financial institutions report all transactions in currency above a fixed threshold to a national central agency with a computerized data base.

Additional elements

19.2 Where systems for reporting large currency transactions are in place, are the reports maintained in a computerized data base, available to competent authorities for AML/CFT purposes?

19.3 Are the systems for reporting large currency transactions subject to strict safeguards to ensure proper use of the information or data that is reported or recorded?

1

See PIN 04/33 April 2, 2004

2

At the time of the decision, the FATF indicated that it was not planning to conduct a further round of the Non-Cooperative Countries and Territories (NCCT) exercise, and it has not done so.

3

This section surveys the compliance in 18 assessments for which ratings were available, supplemented by more detailed review for the 12 Bank/Fund conducted assessments. Details of this analysis, which take account of the differences of the sample of countries assessed under the previous and revised standard, are provided in the supplement.

4

UNSCR 1267 requires the freezing of assets associated with Al Qaeda and Taliban groups.

5

In the Bank, 14.7 staff and expert years of technical assistance were delivered in FY2005 compared to 9.3 years in FY2004. The Fund delivered 19.8 staff and expert years of technical assistance up from 16.5 person years in FY2004. However, the pace of Fund TA had to be cut back in the latter part of FY2005 as the resource intensive assessment program got underway.

6

For the period from January 2004 to June 2005, 54 CAS have included AML/CFT issues, of which 14 involved Bank lending programs with an AML/CFT component.

7

In March 2004, the Boards agreed that the Bank/Fund would become responsible for assessing all areas covered by the standard, including assessing the implementation of criminal justice measures and AML/CFT measures in non-prudentially regulated sectors.

8

FATF structural elements include: general good governance, rule of law, efficient court systems, high-ethical standards for government functionaries, and strong anti-corruption measures.

9

Assessments for insurance, securities, and payments principles usually require one assessor each, and the assessment of banking supervision principles usually requires two assessors. Assessments for Data Standards require 5 assessors and for Fiscal Transparency 3 assessors. The cost of each AML/CFT assessments is about 4 times that of IOSCO assessments and more than twice that of Basel Core Principles assessments.

10

This approach will be consistent with the views expressed by the Fund and Bank Board that each ROSC include a prioritized list of key recommendations, along with an executive summary, and a principle-by-principle summary of observance of the standard. The action plan would draw on the prioritized list of key recommendations.

11

From FATF Interpretative Note to SR IX.

12

Countries can use one or both systems for incoming and outgoing cross-border transportation of currency or bearer negotiable instruments.

13

Countries should implement Special Recommendation IX without restricting either: (i) trade payments between countries for goods and services; or (ii) the freedom of capital movements in any way.

14

Countries that implement a declaration system should ensure that the prescribed threshold is sufficiently low to meet the objectives of Special Recommendation IX. In any event, the threshold cannot exceed EUR/USD 15,000.

Anti-Money Laundering and Combating the Financing of Terrorism - Observations from the Work Program and Implications Going Forward
Author: International Monetary Fund