According to the revised methodology, a four-grade rating system was used: compliant (C), largely compliant (LC), partially compliant (PC), and non-compliant (NC).
Politically Exposed Persons (PEPs) are individuals who are or have been entrusted with prominent public functions in a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves.
See Twelve-Month Pilot Program of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Assessments: Joint Report on the Review of the Pilot Program; Supplement 1 (Washington: IMF/WB: March 16, 2004) for more detail. The old methodology also used a four-level rating system—compliant, largely compliant, materially non-compliant, and non-compliant.
Partially compliant, materially non-compliant, and non-compliant ratings.
Lawyers, notaries, and other independent legal professionals; accountants; real estate agents, trust and company service providers, dealers in precious metals and stones, and casinos. The FATF Recommendations that apply to them are R 12, R 16, R 24, and R 25, many of which are incorporated by reference to the parallel customer identification, suspicious transaction reporting, record-keeping, training, and supervision requirements already applied to financial institutions in R 5, R 6, R 8, R 9, R 10, R 11, R 13, R 15, and R 21.
FATF conducts such analytical and case-studies work under its “Typologies” process.
This estimate is based on the official recording of remittance flows for balance-of-payments statistics. Flows through unofficial channels, such as informal funds transfer systems, are likely to be under recorded.
World Bank, Global Development Finance Report 2005.
Central banks in Mexico and Guatemala have improved the recording of remittance flows in recent years coinciding with implementation of new AML/CFT legislation.
IMF Staff Papers. Vol. 52, No.1, 2005. The authors confirmed the countercyclical effect of remittance flows based on aggregate data on remittances, but imply that remittances do not act like a source of capital for economic development.
Dilip Ratha. 2003. “Workers’ Remittances: An Important and Stable Source of External Development Finance.” Global Development Finance, Chapter 7.
During the course of the DNFBP benchmarking exercise, Staff was also able to gather information on remittance issues, identify good practices for a supervisory framework and look into the effects of the regulations on the accessibility of migrants and other unbanked segments of society. The various countries visited have implemented either a registration or a licensing regime, consistent with FATF recommendations. The choice of regime usually reflects the characteristics of national financial systems as well as national approaches to financial regulation.
The Netherlands has expressed interest in conducting research on its remittances corridor with Surinam using the Bank’s methodology.
Papers of this group are available at its website http://unstats.un.org/unsd/tradeserv/reldocs.asp.
The Task Force includes central banks from sending and receiving countries, international financial institutions, and development banks.
While there is no explicit AML component, it would appear in practice that many specific mechanisms for implementing CFT protections would also protect against ML.
The first typologies conference that addressed NPOs was in October, 2003; although, a few case studies were presented in the 2002 Best Practices Paper.
In FATF practice, an Interpretative Note (IN) is an integral part of the standard and can be used to develop essential assessment criteria for rating a country. A Best Practices Paper (BPP) cannot be used as a basis for essential, only additional (voluntary) criteria. The BPP for non-profits, however, does provide some fairly detailed suggestions about how jurisdictions could approach the problem.
Salamon, Lester; Solkolowski, S. Wojciech; et al, Global Civil Society: Dimensions of the Nonprofit Sector, (Kumarian Press: Bloomfield, CT, 2004), vol. 2, pp. 15–16. This study, sponsored by Johns Hopkins University, only covers 36 countries, so the real size of the global sector is larger.
Registration involves authorities collecting and maintaining informational records about an entity. Licensing is granting an entity permission to perform an activity or receive a benefit and usually implies some level of government approbation.
Due to lack of consistency in the assessment process on this Recommendation, not all the reports convey clear information about country NPO regimes. These breakdowns are therefore tentative.
The most prevalent type of such organizations is the government “Zakat” organization in certain jurisdictions where Islam is the established religion. However, variations on this model can be found elsewhere as well.
In one country, the authorities have published a set of “voluntary best practices” and the tax authorities are preparing guidance for overseas grant-makers. These efforts have come under a great deal of criticism from the country’s NPO sector. In addition, the country’s bilateral donor agency has tightened the due diligence procedures it demands from its grantees and contractors to minimize the possibility of their funds ending up in the hands of terrorists. In another country, the NPO regulatory authority has, without having to issue new regulations, focused its considerable powers over domestically-based charities on the fight against FT. One new possibility that has been raised by FATF is whether NPO-specific indicators of suspicion could be developed and disseminated to guide financial institutions in their dealings with NPOs.