## amlcft-thematic-fund-phase-iii-program-document-final-04082020

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### AML/CFT Thematic Fund: overview and purpose
- LEG delivers capacity development (technical assistance (TA), training, and related research) to help countries address money laundering (ML), terrorist financing (TF), and related financial integrity issues.
- AML/CFT Thematic Fund (TTF) established in 2009 to enhance member support through donor partnerships.
- Overall objective: mitigate macro-relevant consequences of weak AML/CFT frameworks through long-term, sequenced CD engagements typically two to three years designed to deliver meaningful, measurable, and sustainable results.
- Program supports strengthening AML/CFT legal, regulatory, and institutional frameworks and funds research to expand understanding of ML risks and mitigation.

### Phase III renewal, scope, and funding
- Proposed Phase III delivery period: July 2020 through April 2026.
- Funding sought: US$27 million for the six-year period (FY21–26).
- Phase III aims:
  - realize efficiencies from a consolidated TA strategy and improved donor coordination;
  - broaden geographical coverage (e.g., small island states and fragile countries);
  - accommodate four or more countries from four of the IMF’s five regional groupings.

### Rationale: macroeconomic and financial stability implications
- Deficiencies in AML/CFT regimes can:
  - impede or cut access to global financial markets via pressures on correspondent banking relationships (CBRs);
  - increase costs of financial services and negatively affect bank ratings;
  - threaten domestic and external financial stability through volatile inflows/outflows and banking crises;
  - weaken revenue collection (e.g., due to tax crimes such as value-added tax fraud and tax evasion);
  - undermine financial sector development where illegal transactions occur outside the formal sector (e.g., cash and virtual currencies).
- IMF financial integrity CD aims to address threats to global financial stability derived from the abuse of weak or ineffective legal and institutional frameworks.

### Evidence of impact and evaluation
- Independent evaluation of the AML/CFT TTF Phase II completed in 2019 assessed overall performance as excellent and rated highly on OECD DAC criteria: relevance, efficiency, effectiveness, sustainability, and impact.
- Country examples cited:
  - Sudan: IMF CD under the TTF since December 2013; FATF plenary acknowledged significant progress in October 2015; MENA FATF removed Sudan from enhanced follow-up in April 2016; sanctions and Egmont Group membership in 2017.
  - Ukraine: CD supported anti-corruption objectives of IMF-supported program with results including risk-based AML supervisory tools, improved inspections, increased regulatory sanctions, increased suspicious transaction reporting, and marked increases in investigation and prosecution of corruption offenses by high-level public officials.
- Independent evaluation of Phase II completed: 2019.

### Challenges to effective implementation
- Demand for AML/CFT CD rose after the 2012 revisions of the AML/CFT standard.
- Current assessment methodology emphasizes effectiveness in addition to technical compliance, increasing complexity and resource implications.
- Low effectiveness ratings can lead to FATF monitoring and public listing, with potential impacts on access to financial markets and CBR pressures.

### Selection criteria for CD engagements
- CD engagements guided by criteria reflecting IMF expertise, comparative advantage, and strategic CD priorities:
  - i. extent of integration of CD with IMF surveillance and programs;
  - ii. status of the requesting country in international AML/CFT compliance (e.g., FATF listing);
  - iii. level of ML/TF threats and AML/CFT framework vulnerabilities;
  - iv. level of country ownership, high-level commitment, and absorptive capacity of recipient agency staff;
  - v. availability of resources (financial and human) from IMF and recipient authorities;
  - vi. extent to which CD ensures complementarity and avoids duplication with other TA providers;
  - vii. consistency with the IMF Managing Director’s Global Policy Agenda;
  - viii. extent to which the overall TTF program balances recipients across the globe.
- Phase III emphasis: broaden geographical coverage and accommodate four or more countries from four of the IMF’s five regional groupings.

### Modular delivery approach and modules
- CD organized around four AML/CFT TA modules, delivered sequentially or concurrently as part of a customized CD strategy:
  - i. National Strategies and Coordination;
  - ii. National ML/TF Risk Assessments;
  - iii. Legislative drafting, including for CBRs, virtual asset service providers (VASPs), and other topical legal issues;
  - iv. Structures and tools for building capacity for effective AML/CFT supervision and operationalization of FIU functions.
- Module scopes and activities:
  - National Strategies and Coordination: advice on strategies, coordination, preventive requirements across sectors, seminars for national coordinators, parliamentarians, private sector.
  - Risk Assessment: enables officials to identify, measure, and mitigate ML/TF risks and better allocate resources.
  - Legislative Drafting: advice and assistance drafting customized laws/regulations; delivered often from IMF HQ; may include use of AML/CFT to address tax compliance and regulation of VASPs.
  - Structures and Tools: legal and operational advice for FIUs and supervisors, development of manuals, procedures, training in offsite/onsite supervision and inspection procedures.

### Delivery modalities
- Traditional modalities: HQ-based staff, short-term experts, long-term regional advisors in four regions: Africa, Asia, Middle East and Central Asia, and Latin America and the Caribbean.
- Increased reliance on remote delivery informed by COVID-19 and security-constrained contexts to maximize impact and minimize carbon footprint.
- Delivery achieved through long-term planning, defined modules customized to country circumstances, combining staff and field experts, strict quality control via head office review and backstopping.
- Online training:
  - Portion of Phase III budget proposed to develop online training materials aligned with FATF Recommendations.
  - Online course development phases: (i) course design and syllabus; (ii) development of materials; (iii) pilot testing.
- Resident Regional Advisors (RRAs):
  - RRAs deployed in Latin America and the Caribbean; Africa; the Asia Pacific; and the Middle East, North Africa and Central Asia region.
  - For Phase III, IMF will consider placing an additional RRA in francophone Africa subject to demand.

### Topical issues prioritized in Phase III
- General emphasis on beneficial ownership, loss of CBRs, virtual assets, and VASPs.
- VASPs:
  - FATF amendment in October 2018 requires countries to ensure VASPs are licensed or registered and supervised or monitored for AML/CFT purposes.
  - FATF definition of a VASP: any natural or legal person that conducts one or more of the following activities or operations for or on behalf of another natural or legal person:
    - (i) exchange between virtual assets and fiat currencies;
    - (ii) exchange between one or more forms of virtual assets;
    - (iii) transfer of virtual assets;
    - (iv) safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets;
    - (v) participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
  - Phase III CD deliveries will assist countries in addressing ML/TF risks from virtual asset activities and VASP operations; short-term demand expected mostly for legal drafting.
- CBRs:
  - IMF assistance includes assessing scope/drivers of CBR pressures, facilitating stakeholder communication, designing policy responses, capacity building, and data collection/monitoring of CBR trends.
  - Effective CD measures cited: enhancing communication between supervisors and respondent banks and between correspondent and respondent banks.

### Research and development
- IMF will conduct analytical work to develop tools supporting CD delivery and inform future TA.
- Resources for research and development envisioned not to exceed five percent of the TTF’s total envelope.
- Specific research project proposals submitted to the Steering Committee (SC) as part of the annual work plan.

### Coordination and integration
- Country-level programming follows an initial scoping phase to plan engagements, select modules, coordinate with other donors, prepare budgets, outline objectives, and confirm authority commitment.
- Integration with IMF surveillance and lending:
  - AML/CFT CD increasingly integrated into surveillance and IMF-supported programs; cited exits from FATF monitoring include Afghanistan, Iraq, Kuwait, Nepal, and Sudan.
  - LEG participation in Article IV and UFR missions increased to discuss macro-relevant financial integrity issues.
- Coordination with other development partners: World Bank, UN, bilateral providers (Australia, United States), FATF, FSRBs, Egmont Group; RRAs serve as focal points.

### Governance and operational arrangements
- Steering Committee (SC):
  - Composed of donor representatives and IMF staff; observers invited as relevant.
  - SC meetings expected annually; chaired by a donor with rotating chairmanship.
  - SC functions: strategic guidance, policies and priorities, endorsement of indicative multi-year work and financial plans, review progress, assess performance.
  - SC decisions by consensus; lack of consensus leads to postponement or withdrawal of proposals.
  - SC endorsement sought at strategic points: initial country selection, scoping, multi-module engagement and country budget, project evaluations at module completion.
- Work Plan:
  - Demand-driven TA selection based on criteria including level of economic development; institutional weaknesses; risk exposure to ML and TF; long-term commitment.
  - Multi-year work plan includes comprehensive country engagements, targeted interventions, research and development.
  - Increases or decreases of 10 percent or less in SC-approved budgets can be made without SC endorsement.
- Accountability and quality control:
  - TA organized under IMF’s RBM approach with clear objectives, outputs, and indicators.
  - Project implementation tracked through IMF’s CD-PORT system.
  - AML/CFT CD supervised and backstopped by LEG’s Financial Integrity Group.
  - Operational quality control: expert screening, HQ backstopping, regular self-assessments.
- Reporting and evaluation:
  - Donors access project status via Partners Connect.
  - Independent evaluation of AML/CFT CD and associated analytical work under TTF Phase III to be carried out no later than after 40 months of operations by outside experts.

### Results-based framework
- Program-level log frame developed; each country project with pre-specified objectives, outputs, and indicators.
- Monitoring and evaluation mechanisms include donor-mandated evaluations, peer review processes, and post-training feedback.
- Common evaluation framework requires external evaluation of delivery for every phase.
- CD-PORT system used to monitor progress toward objectives, outcomes, milestones, and budget execution.

### Financing and administrative issues
- Estimated total budget of AML/CFT TA under Phase III of the TTF: US$27 million over July 2020 to April 2026.
- Estimated level of implementation around US$4.5 million per year, with an increase in Year 4 to cover external evaluation costs.
- Administrative arrangements:
  - Donor contributions made into a multi-donor AML/CFT Phase III Subaccount established by the IMF; funds commingled.
  - Financial arrangements set out in a letter of understanding defining purposes, methods, terms, and conditions.
  - Recruitment and procurement follow IMF normal procedures; procurement requires at least three competitive bids.
  - IMF will charge all project-related costs on the basis of actual cost, including IMF staff time.
  - IMF administration fee: seven percent program fee.
  - Donors receive reports on subaccount expenditures and commitments; operations subject to annual audits.
  - Narrative reporting at annual SC meeting will detail progress against the strategic logical framework.

### Annex I: catalog of log frames (selected highlights)
- I.1 AML/CFT National Risk Assessment Log Frame:
  - Strategic objective: country gains an understanding of its ML/TF risks.
  - Project objective verifiable indicator: country is able to demonstrate that it understands its ML/TF risks.
  - Outcomes include formation of NRA committee, use of quantitative/qualitative data, communication of key findings.
- I.2 AML/CFT National Strategy Log Frame:
  - Strategic objective: country has a national plan to address ML/TF risks.
  - Outcomes include approval and implementation of national AML/CFT strategy and increased compliance/effective implementation with FATF standard.
- I.3 AML/CFT Legal Drafting Log Frame:
  - Strategic objective: legal foundation for improved compliance/effective implementation of AML/CFT measures.
  - Outcomes include enactment of AML/CFT laws/regulations in line with FATF standard and publication of enacted laws.
- I.4 AML/CFT Structures and Tools (Supervision) Log Frame:
  - Strategic objective: enhanced risk-based AML/CFT supervisory framework.
  - Outcomes include supervisors conducting RBA-based offsite and onsite activities, development of supervisory manuals, transaction-testing procedures, and institutional supervisory strategies.
- I.5 AML/CFT Structures and Tools (FIU) Log Frame:
  - Strategic objective: strengthened financial intelligence system improving detection and prosecution of ML/TF.
  - Outcomes include FIU producing timely tactical intelligence, strategic analysis, improved response times, increased operational disseminations supporting investigations/prosecutions.
- I.6 Preventing Illicit Financial Flows: International Cooperation Log Frame:
  - Strategic objective: strengthened international cooperation on illicit financial flows.
  - Outcomes include systems to gather/analyze cross-border financial flows, MOUs for cooperation, targeted administrative and judicial cooperation.
- I.7 Diagnostic of Pressures on Correspondent Banking Relationships (CBRs) Log Frame:
  - Strategic objective: understanding and addressing pressures on CBRs.
  - Outcomes include studies of CBR pressures, action plan to mitigate pressures, monitoring mechanism, and stakeholder consultations.

*International Monetary Fund, AML/CFT Thematic Fund Program Document (Phase III).*

### 1. Average Allocation of Overall AML/CFT Resources per Workstream __________________________ 6

### amlcft-thematic-fund-phase-iii-program-document-final-04082020 - 1. Average Allocation of Overall AML/CFT Resources per Workstream

### AML/CFT Thematic Fund: Overview and Purpose
- The IMF’s Legal Department (LEG) delivers capacity development (CD) programs (technical assistance (TA), training, and related research) to help countries address money laundering (ML), terrorist financing (TF), and related financial integrity issues.
- The AML/CFT Thematic Fund (TTF) was established in 2009 as a mechanism, in partnership with donor countries, to enhance support for members’ efforts and meet demand for CD.
- Overall objective: to mitigate macro-relevant consequences of weak AML/CFT frameworks through long-term, sequenced CD engagements (typically two to three years) designed to deliver meaningful, measurable, and sustainable results.
- The program supports strengthening AML/CFT legal, regulatory, and institutional frameworks and funds research to expand understanding of ML risks and mitigation.

### Phase III Renewal, Scope, and Funding
- Proposed Phase III delivery period: July 2020 through April 2026.
- Funding sought: US$27 million for the six-year period (FY21–26).
- Phase III aims to realize efficiencies from a consolidated TA strategy and improved donor coordination, broaden geographical coverage (e.g., in small island states and fragile countries), and accommodate four or more countries from four of the IMF’s five regional groupings.

### Rationale: Macroeconomic and Financial Stability Implications
- Deficiencies in AML/CFT regimes can:
  - Impede or cut access to global financial markets via pressures on correspondent banking relationships (CBRs).
  - Increase costs of financial services and negatively affect bank ratings.
  - Threaten domestic and external financial stability through volatile inflows/outflows and banking crises.
  - Weaken revenue collection (e.g., due to tax crimes such as value-added tax fraud and tax evasion).
  - Undermine financial sector development where illegal transactions occur outside the formal sector (e.g., cash and virtual currencies).
- IMF financial integrity CD aims to address threats to global financial stability derived from the abuse of weak or ineffective legal and institutional frameworks.

### Evidence of Impact and Evaluation
- Independent evaluation of the AML/CFT TTF Phase II completed in 2019 assessed overall performance as excellent and gave high marks against OECD DAC criteria of relevance, efficiency, effectiveness, sustainability, and impact.
- Examples of CD impact:
  - Sudan: IMF CD under the TTF since December 2013 helped address strategic AML/CFT deficiencies; FATF plenary acknowledged significant progress in October 2015 and Sudan was removed from FATF monitoring; Middle East and North Africa FATF plenary removed Sudan from enhanced follow-up in April 2016; in 2017, individuals were sanctioned for ML activities by Sudanese courts and Sudan joined the Egmont Group.
  - Ukraine: CD supported anti-corruption objectives of IMF-supported program by strengthening AML/CFT supervision, enhancing production of financial intelligence for corruption investigations, and improving intelligence sharing. Results included development of risk-based AML supervisory tools, improved inspections, increased regulatory sanctions, increased suspicious transaction reporting, and marked increases in investigation and prosecution of corruption offenses by high-level public officials.

### Challenges to Effective Implementation
- Demand for AML/CFT CD increased after the 2012 revisions of the AML/CFT standard.
- The current assessment methodology emphasizes effectiveness (the extent to which regimes mitigate ML, TF, and PF risks) in addition to technical compliance.
- Increased complexity and resource implications of international standards make it harder for countries to achieve satisfactory assessment ratings.
- Low effectiveness ratings can lead to FATF monitoring and public listing, with potential impacts on access to financial markets and CBR pressures.

### Selection Criteria for CD Engagements
- CD engagements are guided by criteria considering IMF expertise, comparative advantage, and strategic CD priorities:
  i. the extent of integration of CD activities with IMF surveillance and programs;
  ii. the status of the requesting country in terms of international AML/CFT compliance (e.g., FATF listing);
  iii. the level of ML/TF threats and AML/CFT framework vulnerabilities;
  iv. the level of country ownership, high-level commitment, and absorptive capacity of recipient agency staff;
  v. the availability of resources (both financial and human) from the IMF and recipient authorities;
  vi. the extent to which CD ensures complementarity and avoids duplication with other TA providers;
  vii. consistency with the IMF Managing Director’s Global Policy Agenda; and
  viii. the extent to which the overall TTF program balances recipients across the globe.
- Phase III emphasis: broaden geographical coverage and aim to accommodate four or more countries from four of the IMF’s five regional groupings.

### Modular Delivery Approach
- CD under approved projects organized around four AML/CFT TA modules, delivered sequentially or concurrently as part of a customized CD strategy:
  i. National Strategies and Coordination;
  ii. National ML/TF Risk Assessments;
  iii. Legislative drafting, including for correspondent banking relationships (CBRs), virtual asset service providers (VASPs), and other topical legal issues;
  iv. Structures and tools for building capacity for effective AML/CFT supervision and effective operationalization of FIU functions.
- Comprehensive engagement often involves several modules delivered sequentially or consecutively, and coordinated with partners such as the World Bank Group and other providers.

### Key Numeric and Timing Facts
- TTF established: 2009.
- Typical CD engagement length: two to three years.
- Phase III delivery period: July 2020 through April 2026.
- Phase III funding sought: US$27 million for FY21–26.
- Independent evaluation of Phase II completed: 2019.
- Example country engagement start dates and milestones:
  - Sudan: IMF CD under TTF since December 2013; FATF plenary acknowledgment October 2015; MENA FATF enhanced follow-up removal April 2016; individual sanctions and Egmont Group membership in 2017.
- TA recipient country counts shown for FY15–Present: FY15: 3; FY16: 15; FY17: 9; FY18: 10; Present: 17.
- Phase III target: accommodate four or more countries from four of the IMF’s five regional groupings.

*International Monetary Fund, AML/CFT Thematic Fund Program Document (Phase III).*

### Box 3. AML/CFT TTF CD Delivery Modules

### Box 3. AML/CFT TTF CD Delivery Modules

### Modules: scope and activities
- National Strategies and Coordination
  - Provides specialist advice on AML/CFT strategies, coordination, and policy issues.
  - Covers application of AML/CFT preventive requirements to banks, insurance companies, securities firms, lawyers, and other nonfinancial businesses and professions.
  - Promotes cooperation between domestic AML/CFT stakeholders and with international counterparts.
  - Delivers seminars to transfer knowledge to national coordinators, parliamentarians, and the private sector to enable collaboration on drafting and implementing AML/CFT policies, frameworks, laws, regulations, and institutions.
- Risk Assessment
  - Enables officials to better identify, measure, and mitigate ML/TF risks.
  - Aids better allocation of resources nationally and sector by sector.
- Legislative Drafting
  - Provision of advice and assistance in drafting customized AML/CFT laws, regulations, and guidelines.
  - A team of lawyers and financial sector experts provides advice and commentary on legislative proposals, typically prior to parliamentary submission.
  - Drafting of new or amended AML or CFT legal and regulatory materials undertaken if required.
  - Often delivered from IMF headquarters to maximize output and minimize travel expenses; face-to-face meetings conducted as part of other TA missions when needed.
  - May include interventions regarding the use of the AML/CFT framework to address tax compliance or topical issues such as regulation of VASPs.
- Structures and Tools
  - Delivered to AML/CFT institutions (FIUs, AML/CFT supervisors, or other relevant authorities).
  - Provides detailed legal and operational advice on formation and development of FIUs and training of FIU staff.
  - Assistance in enhancing supervisory oversight of financial and nonfinancial reporting institutions.
  - Support for development of specialized supervisory units, manuals, procedures, and training of supervisors in offsite and onsite supervision and inspection procedures.

### Delivery modalities
- Traditional modalities
  - CD delivered by HQ-based staff, short-term experts, and long-term regional advisors in four regions: Africa, Asia, Middle East and Central Asia, and Latin America and the Caribbean.
  - Increased reliance on remote delivery informed by lessons from the COVID-19 crisis and security-constrained contexts to maximize impact and minimize carbon footprint.
  - Delivery achieved through:
    - long-term planning fostering close relationships between country officials and IMF staff;
    - defined modules customized to country circumstances;
    - combining staff expertise with short- and long-term field experts to optimize skills and reduce travel costs;
    - strict quality control via head office review, backstopping of experts, and project evaluations at milestones.
  - Annex I details LEG’s AML/CFT results-based management (RBM) catalog.
  - Projects financed by the TTF delivered pursuant to workstreams approved by the Steering Committee (SC); additional workstreams may be developed.
- Online Training
  - Portion of Phase III budget proposed to develop online training materials on various AML/CFT areas.
  - Courses aligned with FATF Recommendations and international best practices identified by IMF staff.
  - Combination of online courses with onsite missions to improve cost-effectiveness and reach.
  - Online courses intended to be (i) learner-centered; and (ii) less expensive over time and able to be offered to a wider audience.
  - Project to develop an online course consists of three phases:
    - (i) course design and syllabus;
    - (ii) development of materials;
    - (iii) pilot testing.
- Resident Regional Advisors (RRAs)
  - RRAs have been deployed in Latin America and the Caribbean; Africa; the Asia Pacific; and the Middle East, North Africa and Central Asia region.
  - RRAs assist project teams and TA recipients, facilitate donor coordination, monitor implementation of project recommendations, and promote harmonized recommendations.
  - For Phase III, IMF will consider placing an additional RRA in francophone Africa subject to demand.
  - RRAs engage with FSRBs and other TA providers to avoid duplication and focus efforts; participate in regional TA beyond specific projects and in IMF missions not funded through the TTF to ensure consistency.
  - RRAs act as IMF focal points for coordination with FSRBs and donor/provider forums.

### Topical issues prioritized in Phase III
- General
  - Phase III places additional emphasis on topical issues such as beneficial ownership, loss of CBRs, virtual assets, and virtual asset service providers.
- Virtual Asset Service Providers (VASPs)
  - IMF follows developments in fintech and virtual assets and implications for financial integrity, stability, regulation, and monetary policy.
  - Following the amendment of the FATF standard in October 2018, countries are required to ensure that VASPs are licensed or registered and supervised or monitored for AML/CFT purposes.
  - FATF definition of a VASP: any natural or legal person that conducts one or more of the following activities or operations for or on behalf of another natural or legal person:
    - (i) exchange between virtual assets and fiat currencies;
    - (ii) exchange between one or more forms of virtual assets;
    - (iii) transfer of virtual assets;
    - (iv) safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets;
    - (v) participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
  - Phase III CD deliveries will assist countries in addressing ML/TF risks from virtual asset activities and VASP operations; short-term demand expected to relate mostly to legal drafting.
- Correspondent Banking Relationships (CBRs)
  - CBRs under pressure in several jurisdictions affecting financial inclusion and remittances.
  - IMF assistance includes assessment of scope and drivers of CBR pressures, facilitation of communication among stakeholders, design of policy responses, capacity building to strengthen regulatory and supervisory frameworks, and data collection/monitoring of CBR trends.
  - CD forms include legislative drafting and institution building tailored to country context and prioritized to address CBR withdrawal.
  - CD measures cited as effective: enhancing communication between supervisors and respondent banks and between correspondent and respondent banks, removing impediments to information sharing.
  - IMF will continue targeted CD to strengthen AML/CFT regimes and banking supervision and to facilitate international dialogue to identify solutions to CBR pressures.
- Beneficial Ownership/Entity Transparency
  - Phase III CD will assist countries in enhancing implementation of FATF standards on transparency of legal persons and arrangements.
  - Implementation requires adequate, accurate, and timely basic and beneficial ownership information that can be obtained or accessed in a timely fashion by competent authorities via collection/registry by authorities, companies, or private parties.
  - CD delivery in this area will draw on best practices identified during Phase II and will be provided within the Legal Drafting and Structures and Tools modules.

### Research and development
- IMF will conduct analytical work to develop tools supporting CD delivery.
- Research projects can contribute to broad AML/CFT themes of international relevance and inform future TA delivery.
- Resources devoted to research and development are envisioned not to exceed five percent of the TTF’s total envelope.
- Proposals for specific research and development projects will be submitted to the SC as part of the annual work plan.

### Coordination and integration
- Coordination across modules
  - Country-level programming developed after an initial scoping phase; focused scoping missions plan engagements, select modules, coordinate with other donors, prepare budgets, outline objectives, and confirm authority commitment.
  - Selection of modules targeted to country vulnerabilities and threats to mitigate major risks.
  - As countries progress through customized modules, they should transition toward increasing compliance (partially, largely, or fully) with international standards and greater effectiveness in mitigating ML/TF risks.
- Integration with IMF surveillance and lending
  - AML/CFT CD program increasingly integrated into surveillance and IMF-supported programs; helped countries strengthen AML/CFT frameworks and exit FATF monitoring (examples cited: Afghanistan, Iraq, Kuwait, Nepal, and Sudan).
  - LEG participation in Article IV and UFR missions increased to discuss macro-relevant financial integrity issues and facilitate synergies with CD.
  - LEG coordinates CD prioritization internally through the resource allocation planning (RAP) process and in close consultation with area departments.
- Coordination with other development partners
  - IMF staff coordinates with multilateral (World Bank, UN) and bilateral (Australia, United States) TA providers and stakeholders (FATF, FSRBs, Egmont Group) to avoid duplication and maximize impact.
  - Scoping phase designed to collect information on other donors’ activities and assess opportunities for complementarity or partnership.
  - RRAs serve as focal points for discussions with recipient countries during FSRB plenaries and typology meetings.

### Governance and operational arrangements
- Steering Committee (SC)
  - SC composed of donor representatives and IMF staff; international and regional institutions and other TA providers invited as observers where relevant.
  - IMF staff serve as secretariat.
  - SC meetings expected to be held annually with additional meetings as needed.
  - SC chaired by a donor, with chairmanship usually rotating annually; IMF secretariat proposes a chairman and vice chairman each year with vice chairman becoming chairman the following year.
  - SC functions: provide strategic guidance, set policies and priorities, endorse indicative multi-year work and financial plans, review progress, and assess program performance.
  - SC decisions by consensus; if consensus not reached, proposed decision postponed or withdrawn.
  - SC endorsement sought at strategic points: initial country selection, scoping activities, multi-module engagement and country budget, and project evaluations at module completion.
  - Research project proposals submitted to the SC as part of annual work plan with appended short concept notes; project milestones used to assess feasibility and progress.
- Work Plan
  - Demand-driven selection and delivery of TA.
  - TA project selection based on criteria: (i) level of economic development; (ii) institutional weaknesses and capacity needs; (iii) risk exposure to ML and TF; (iv) long-term commitment to improvements consistent with international standards.
  - Multi-year work plan to include comprehensive country-level engagements, targeted interventions, and research and development.
  - Initial country program budgets generally cover scoping phase costs; full country program and projected budgets presented after scoping.
  - Proposed substantive changes to the work plan sent to SC by email for endorsement on a non-objection/lapse of time basis.
  - Increases or decreases of 10 percent or less in SC-approved budgets can be made without seeking SC endorsement.
  - Workplan includes a reserve list of projects for operational flexibility.
- Accountability and quality control
  - TA organized into specific projects under IMF’s RBM approach; each project has clear pre-specified objectives, outputs, and indicators.
  - Project implementation and monitoring enabled through IMF’s CD-PORT system for managing and tracking TA activities.
  - AML/CFT CD supervised and backstopped by LEG’s Financial Integrity Group.
  - Operational quality control provided through:
    - screening and selection of experts;
    - regular supervision and backstopping from IMF headquarters;
    - regular self-assessments against pre-defined objectives and outcomes.
  - Area departments monitor beneficiary progress in implementing reforms supported by the TTF in the context of IMF-supported programs and surveillance activities.
- Partners Connect and reporting
  - Donors can access project status via Partners Connect (https://www.imfconnect.org/content/imf/en/partners-connect/welcome.html), a secure donor portal providing financial and narrative information, monthly-validated financial reports, donor arrangements, project documents, progress reports, and self-assessments.
  - Reporting obligations beyond annual SC meeting:
    - (i) circulation for information of detailed project descriptions at project start;
    - (ii) ongoing comprehensive information on project status and resource drawdown on the Donor Gateway;
    - (iii) quarterly reports generated from IMF systems listing planned missions for 2–3 months ahead.
- Evaluation
  - An independent evaluation of AML/CFT CD and associated analytical work under TTF Phase III to be carried out no later than after 40 months of operations by a team of outside experts.
  - Evaluation will assess effectiveness and sustainability and formulate recommendations, considering progress against Phase II independent evaluation findings.
  - Evaluation findings to inform operations for remainder of the phase and beyond.

### Results-based framework
- Program-level log frame developed; each country project designed with clear pre-specified objectives, outputs, and indicators.
- Monitoring and evaluation mechanisms include donor-mandated evaluations, peer review processes, and post-training feedback.
- Common evaluation framework requires external evaluation of delivery for every phase.
- The log frame and CD-PORT system used to monitor progress toward objectives, outcomes, milestones, and budget execution.

### Financing and administrative issues
- Financing summary
  - Estimated total budget of AML/CFT TA under Phase III of the TTF: US$27 million over the period of July 2020 to April 2026.
  - Estimated level of implementation around US$4.5 million per year, with an increase in Year 4 to cover the costs of the external evaluation.
- Administrative arrangements
  - All donor contributions made into a multi-donor AML/CFT Phase III Subaccount established by the IMF for financing TA activities under the TTF; funds commingled.
  - Financial arrangement basis: letter of understanding establishing purposes of contributions and method, terms, and conditions for financing AML/CFT TA activities.
  - IMF administers and accounts for donor contributions per its financial regulations and practices.
  - Recruitment of outside consultants and experts in accordance with IMF normal procedures.
  - Procurement of goods and services requires a competitive bidding process with at least three competitive bids.
  - IMF will charge all project-related costs on the basis of actual cost, including IMF staff time.
  - IMF administration fee: seven percent program fee.
  - Donors provided reports on subaccount expenditures and commitments; operations subject to annual audits.
  - Narrative reporting at annual SC meeting will detail progress in all country projects against the strategic logical framework; updates provided ad hoc throughout the year.

*International Monetary Fund*

### Annex I. AML/CFT Catalog

### Annex I. AML/CFT Catalog

### I.1 AML/CFT National Risk Assessment Log Frame
- Strategic Objective
  - The country gains an understanding of its ML/TF risks
- Project Objective
  - Verifiable Indicators: The country is able to demonstrate that it understands its ML/TF risks.
- Outcomes (expected results) and Verifiable Indicators
  1. The country properly identifies, assesses, and understands its ML/TF risks.
     - 1. Relevant competent authorities with a role in AML/CFT are involved in the risk assessment process (by way of membership and participation in the National Risk Assessment (NRA) committee or working group).
     - 2. Quantitative and qualitative information as well as perception surveys are used for the risk assessment.
     - 3. Authorities produce a list of major ML/TF risks facing the country, substantiated based on reliable data, surveys, and analysis.
     - 4. Key findings are communicated to relevant stakeholders such as agencies and reporting entities (by way of an NRA report or oral briefing).
  2. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. Authorities form an NRA committee or working group. by [date]
     - 1. National risk assessment template and related analysis.
  2. Authorities collect required data. by [date]
     - 2. TA report.
  3. Authorities analyze data. by [date]
     - 3. Delivering national risk assessment workshops, including training material.
  4. Authorities prepare report. by [date]
     - 4. Online NRA surveys.
  5. Authorities communicate key findings to relevant stakeholders. by [date]
- Risks (to be identified at start of project)
  - Five Risk Categories: 1. Political Support; 2. Management Support & Technical Staff Commitment; 3. Resource Adequacy; 4. External Climate; and 5. Other Risks.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

### I.2 AML/CFT National Strategy Log Frame
- Strategic Objective
  - The country has a national plan to address ML/TF risks
- Project Objective
  - Verifiable Indicators: The country develops an AML/CFT national strategy.
- Outcomes (expected results) and Verifiable Indicators
  1. The country prioritizes AML/CFT policy actions.
     - 1. National AML/CFT strategy is approved by the government.
     - 2. Authorities monitor implementation of national AML/CFT strategy.
     - 3. The national strategy, including items outlined in national action plan, is implemented.
     - 4. Increased compliance and effective implementation with FATF standard.
  2. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. Authorities develop a national strategy. by [date]
     - 1. National strategy workshop.
  2. Authorities approve a national strategy. by [date]
     - 2. Comments on draft national AML/CFT strategy.
  3. Authorities review and adjust the national strategy. by [date]
     - 3. TA report.
- Risks
  - Five Risk Categories as listed above.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

### I.3 AML/CFT Legal Drafting Log Frame
- Strategic Objective
  - The country has the legal foundation for improved compliance/effective implementation of AML/CFT measures
- Project Objective
  - Verifiable Indicators: The country has in place the necessary laws and regulations for improved compliance/effective implementation of AML/CFT measures.
- Outcomes (expected results) and Verifiable Indicators
  1. Country’s AML/CFT legal framework is in line with FATF standard.
     - 1. AML/CFT law and regulations developed in line with the FATF standard are enacted by the country's legislative process.
     - 2. Publication of enacted law or regulation.
     - 3. Technical compliance ratings of country’s mutual evaluation improves.
  2. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. Authorities develop AML/CFT law, amendment, or regulation in line with FATF standard. by [date]
     - 1. Draft legislation and regulations.
  2. Cabinet or minister approve new AML/CFT law, amendment, or regulation. by [date]
     - 2. Comments on legislation and regulations.
  3. Authorities submit new AML/CFT draft law or amendment to parliament. by [date]
     - 3. TA report.
  4. Parliament or ministry approve new AML/CFT law, amendment, or regulation. by [date]
     - 4. Training material prepared for workshop/capacity development sessions.
- Risks
  - Five Risk Categories as listed above.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

### I.4 AML/CFT Structures and Tools (Supervision) Log Frame
- Strategic Objective
  - The country has an enhanced risk-based AML/CFT supervisory framework that results in a higher level of compliance and effectiveness in implementation by licensed and/or registered institutions
- Project Objective
  - Verifiable Indicators: The country strengthens its supervisory framework for AML/CFT and conducts supervisory activities based on the money laundering/terrorist financing (ML/TF) risk profile assigned to licensed and/or registered institutions.
- Outcomes (expected results) and Verifiable Indicators
  1. Supervisors appropriately regulate, supervise, and/or monitor licensed and/or registered institutions to ensure compliance with and effective implementation of AML/CFT requirements. The following indicators refer to licensed and/or registered institutions:
     - 1. AML/CFT supervision, for both offsite and onsite activities, is conducted using an RBA, methodology, systems and tools.
     - 2. Offsite activities—Supervisors are able to identify and generate a list of higher risk licensed and/or registered institutions using the RBA (e.g., risk model).
     - 3. Onsite activities—Supervisors are guided by transaction testing/examination procedures developed for conducting onsite inspections of licensed and/or registered institutions.
     - 4. Sound risk-based AML/CFT supervisory tools increase the number of onsite AML/CFT inspections (for countries starting with no AML/CFT supervisory capacity).
     - 5. Supervisory resources are effectively directed to identified areas of potential ML/TF (e.g., licensed and/or registered institutions assigned a high-risk profile are subject to more frequent, comprehensive, and intensive supervisory activities).
  2. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. Authorities develop and implement an AML/CFT risk model, an RBA, and methodology for conducting offsite activities. by [date]
     - 1. Diagnostic and/or TA reports.
  2. Authorities develop and implement transaction testing/examination procedures for conducting onsite inspections of licensed and/or registered institutions. by [date]
     - 2a. AML/CFT Supervisory Manual including a section addressing risk-based offsite surveillance/monitoring tools, methodology, and procedures.
  3. Authorities assign an ML/TF risk profile, using the results of the off- and onsite activities, to each licensed and/or registered institution. by [date]
     - 2b. AML/CFT Supervisory Manual including risk-based onsite transactions testing/examination procedures.
  4. Authorities develop a supervisory strategy using the institutional risk profile tailored to each licensed and/or registered institution. by [date]
     - 2c. AML/CFT Supervisory Manual including criteria for assigning risk profiles to licensed and/or registered institutions.
  - Additional outputs:
     - 3. Institutional AML/CFT supervisory strategy and annual supervisory plan.
     - 4. Formal AML/CFT training modules/courses.
     - 5. Enhanced regulations, circulars, or guidance incorporating AML/CFT preventive measures, as applicable.
- Risks
  - Five Risk Categories as listed above.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

### I.5 AML/CFT Structures and Tools (FIU) Log Frame
- Strategic Objective
  - The country has a strengthened financial intelligence system which improves the country’s ability to detect and prosecute ML/TF
- Project Objective
  - Verifiable Indicators: The country strengthens its financial intelligence system, thereby improving its ability to detect and prosecute ML/TF and its ability to cooperate internationally.
- Outcomes (expected results) and Verifiable Indicators
  1. FIU produces timely tactical intelligence products that support AML/CFT investigations for law enforcement and other competent authorities.
     - 1. FIU utilizes operational systems, processes, procedures, and resources for managing receipt and analysis of suspicious transaction reports (STRs) and other reports and dissemination of intelligence products.
     - 2. Feedback from law enforcement on disseminations is positive (through feedback forms and other means).
     - 3. Improvement in average response time to requests from domestic law enforcement and foreign FIUs.
     - 4. Increase in the number of operational disseminations that contribute to ML/TF investigations, prosecutions, and convictions.
  2. FIU produces strategic analysis that identifies targets for tactical analysis and informs policy decisions, resource allocation, national risk assessments, and risk assessments conducted by reporting entities.
     - 1. Increase in the number of strategic analysis reports.
     - 2. Increase in the number of operational disseminations that contribute to ML/TF investigations, prosecutions, and convictions.
  3. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. Authorities develop an adequate organizational structure. by [date]
     - 1. TA report.
  2. Authorities develop robust management procedures. by [date]
     - 2. Financial intelligence operations manual.
  3. Authorities develop adequate security procedures. by [date]
     - 3. Technical recommendations regarding FIU organizational structure, operating procedures, IT systems.
  4. Authorities develop FIU operating procedures. by [date]
     - 4. Technical recommendations regarding analytical processes.
  5. Authorities develop a case management system. by [date]
     - 5. Technical advice on strengthening AML/CFT domestic and international cooperation.
  6. Authorities train analysts on operational and strategic analysis. by [date]
     - 6. Training material prepared for workshops/capacity development sessions.
  7. Security procedures.
  8. Suspicious transaction reporting guidelines.
- Risks
  - Five Risk Categories as listed above.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

### I.6 Preventing Illicit Financial Flows: International Cooperation Log Frame
- Strategic Objective
  - The country strengthens its international cooperation on illicit financial flows
- Project Objective
  - Verifiable Indicators: The country strengthens its ability to prioritize international cooperation through a comprehensive review of cross-border financial flows.
- Outcomes (expected results) and Verifiable Indicators
  1. Data on financial flows in and out of the country is gathered and analyzed. Higher risk countries are identified.
     - 1. A system is in place to identify higher risk countries and gather and analyze financial flows data.
  2. Administrative and judicial cooperation is targeted to higher risk countries.
     - 1. Memoranda of understanding (MOUs) are signed and other cooperation arrangements effected to facilitate administrative and judicial cooperation with higher risk countries.
  3. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. Supervisor establishes a framework and system for gathering data on financial flows in and out of the country. by [date]
     - 1. Analysis report on the financial flows in and out of the country.
  2. Supervisor establishes a methodology for analyzing the gathered data. by [date]
     - 2. Review of relevant legal frameworks relating to administrative and judicial cooperation.
  3. Authorities analyze the data on financial flows against other indicators (e.g., trade, foreign investment). by [date]
     - 3. Analysis on the scope of administrative and judicial cooperation.
  4. MOUs are developed and signed. by [date]
     - 4. Draft MOU on cooperation.
  5. Other cooperation arrangements are in place. by [date]
     - 5. TA report.
- Risks
  - Five Risk Categories as listed above.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

### I.7 Diagnostic of Pressures on Correspondent Banking Relationships (CBRs) Log Frame
- Strategic Objective
  - The country understands the extent and nature of pressures on CBRs and identifies targeted measures to address the impact and drivers of CBR withdrawal
- Project Objective
  - Verifiable Indicators: The country identifies the scale, scope, drivers, and consequences of the pressures on CBRs and other related business relationships (e.g., money value transfer services (MVTS), non-government organizations (NGOs)), and identifies targeted measures to mitigate economic impact and address the drivers of pressures on CBRs, as appropriate.
- Outcomes (expected results) and Verifiable Indicators
  1. The country identifies and understands the extent, drivers, consequences, and impact of pressures on CBRs.
     - 1. The Central Bank, in consultation with financial institutions, produces a study on the extent of CBR pressures, including by analyzing trends in CBRs (e.g., volume, value, currency, type).
     - 2. Authorities produce an analysis of potential drivers in consultation with relevant stakeholders (including from the private sector).
     - 3. Authorities, in consultation with relevant stakeholders, produce an analysis of consequences and impact of actual or perceived loss of CBRs and other related business relationships.
  2. The country produces a monitorable action plan to mitigate actual or potential pressures on CBRs and ensures an environment conducive to robust CBRs.
     - 1. The government issues an action plan to competent authorities outlining concrete steps and timeline to address pressures on CBRs, as well as a communication strategy.
     - 2. A monitoring mechanism is put in place to track the action plan’s implementation status.
  3. Authorities have the appropriate competencies and skills in the relevant topic(s)/area(s).
     - 1. Authorities are fully trained on the new or amended law and regulation; and supervisory and financial intelligence tools and methodologies are developed and delivered.
     - 2. Participants value this training, as evidenced by survey results indicating knowledge gain that will assist them in future work delivery.
- Milestones (free text)
  - Milestone Completion Date
- Outputs
  1. The Central Bank collects data on CBRs, including numbers and types of CBRs and trends over past years. by [date]
     - 1. Estimate of the extent of CBR pressures.
  2. AML/CFT supervisors collect data on high-risk customers in financial institutions they supervise (e.g., MVTS, nonprofit organizations (NPOs), politically exposed persons (PEPs)). by [date]
     - 2. Analysis of drivers.
  3. Meetings are organized with relevant public and private sector stakeholders to understand CBR pressures, drivers, and solutions. by [date]
     - 3. Analysis of consequences.
  4. An action plan is  drafted by    (date). by [date]
     - 4. Action plan.
  5. A monitoring mechanism is put in place by  (date). by [date]
     - 5. A monitoring mechanisms is established.
  6. TA report.
- Risks
  - Five Risk Categories as listed above.
  - Risk Level options: Low, Medium, High, Very High, Not Applicable

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_Source: https://www.imf.org/-/media/files/capacity-developement/trust-fund/aml-cft/amlcft-thematic-fund-phase-iii-program-document-final-04082020.pdf_