## FUND STAFF PARTICIPATION IN AML/CFT ASSESSMENTS BY OTHER BODIES — EXECUTIVE SUMMARY ## Source details **Canonical URL:** [FUND STAFF PARTICIPATION IN AML/CFT ASSESSMENTS BY OTHER BODIES — EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020011.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2020/english/ppea2020011.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2020/english/ppea2020011.pdf.json) --- ### Introduction and context - The Fund’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Strategy was last reviewed by the Executive Board in November 2018. - At the 2018 Review Directors agreed that staff would lead, at a minimum, one to two assessments per year. - Except for the pilot of 2014/2015, Fund staff has not participated in assessments led by other AML/CFT assessor bodies. - The global AML/CFT assessment architecture involves multiple assessor bodies: the Financial Action Task Force (FATF) and FATF-Style Regional Bodies (FSRBs), which accept Fund-led assessments as mutual evaluations. ### Rationale for exceptional participation by Fund staff in assessments led by other bodies - Motivation for participation: - Ensure countries are assessed correctly and receive appropriate policy advice because AML/CFT assessments: - Feed into the Fund’s surveillance work. - Inform program conditionality. - Support capacity development. - Existing Fund engagement in quality and consistency: - Participation in select external reviews of assessments as external reviewer. - Contribution to assessor training, country training, and review and discussion of reports. - Evidence of remaining scope for improvement in assessment quality and consistency: - 12 out of 85 published assessment reports (14 percent) were initially not cleared by the FATF after adoption by the authoring FSRB. - Number of assessment reports held up after approval (as of mid-October 2019) by assessor body: - APG 6 out of 14 - CFATF 2 out of 7 - GABAC 0 out of 0 - GAFILAT 1 out of 9 - EAG 1 out of 2 - ESAAMLG 0 out of 8 - FATF 0 out of 25 - GIABA 1 out of 4 - MENAFATF 1 out of 3 - MONEYVAL 1 out of 13 - Conclusion: Staff participation on an exceptional basis could help improve the quality and consistency of assessments led by other bodies and have positive spillover effects. ### Proposed approach and criteria for exceptional participation - Principles: - Participation by Fund staff in assessments led by other bodies should be used only on an exceptional basis. - Selection guided by specific criteria. - Proposed criteria: - Cases where the assessed country has important financial, trade, economic, or legal linkages with other countries: participation justified when the FSRB of the assessed country may lack the Fund’s global perspective and expertise given strong cross-FSRB linkages. - Cases where the Fund has a particular financial integrity-related interest or expertise: participation justified when the Fund’s expertise is relevant and the issue is determined to be macro-relevant. Current examples include pressures on correspondent banking relationships and financial integrity issues related to virtual assets and virtual asset service providers. - Note: Staff involvement should be considered alongside the Fund’s existing role in FATF/FSRB quality and consistency processes and as external reviewer, which remains the first-choice engagement tool. ### Safeguards and disclaimer - Disclosure: - The preface of the report would include a disclaimer in a footnote: "the views expressed in the report are those of the assessor and do not necessarily represent the views of Fund staff, its Executive Board, or IMF Management." - Where Fund staff participates in an assessment, a disclaimer would be included to explain and delineate staff’s role. - Pull-out safeguard: - The Fund can pull out from an assessment if reputational and other risks arise that, in the view of staff, cannot be adequately mitigated. - Proposed grounds for pulling out if staff determines one or more are met: - The assessment or its process is inconsistent with the FATF standards, methodology, or assessment procedures. - There is interference in the assessment process including by the secretariat of the assessor body or by any country, or any other undue pressure that constrains staff and undermines their duties and responsibilities as Fund staff. - There is a lack of training or knowledge on the side of the assessment team (secretariat or assessors) to an extent that it becomes evident the team is unlikely to produce a report of the required quality and consistency, despite advice provided by Fund staff. - Decision process and communication when pulling out: - Decision to pull out would be approved by Management. - Staff would work with the assessor body to attempt to remedy issues prior to disengagement. - FATF and the relevant assessor body would be informed of the reasons for disengagement. - Decision to pull out may occur at any time during an ongoing assessment process (which takes at a minimum 12–14 months) but preferably at an early stage to avoid undue disruption. - Pulling out would result in removing the name of the Fund staff from the list of assessors in the report and other associated references to the Fund. - Limitation: - Independence of assessors is an important feature of FATF’s assessment procedures; assessors’ duty is to produce an independent report as a group. ### Assessment team composition and limitations - Typical team size and specialization: - Assessment teams generally consist of around 8–10 persons to cover the 11 areas of effectiveness that are assessed. - Each assessor covers a particular area; due to the degree of specialization: - It is not possible for assessors to take over assessment responsibilities from other team members. - An assessment is ultimately considered the work product of the assessment team as a whole. - This specialization limits the degree of influence that a single assessor can have over the quality and consistency of the assessment report as a whole. - Caution: - If there are deep structural quality and consistency issues with assessments by a particular FSRB, Fund staff should exercise caution in considering engagement, since such structural issues would likely not be addressed solely through Fund staff participation. ### Application of the framework to follow-up assessments - The same framework applies to participation in FATF/FSRB follow-up assessments, which are distinct from regular assessments. - Characteristics of follow-up assessments: - Undertaken based on the same set of FATF standards, common assessment methodology, and assessment procedures. - Scope is limited (e.g., to a maximum of about four areas, initially rated as insufficiently effective), focusing on key findings and recommended actions from the regular assessment. - Similar quality and consistency procedures are in place as for regular assessments. - Status: - The FATF has commenced the first follow-up assessments for countries whose regular assessments were adopted five years ago; FSRBs plan to follow in due course. - The Fund may lead such follow-up assessments (this has not happened yet); Fund staff may be asked to participate in a follow-up assessment of another body only if conditions and safeguards that apply to exceptional participation in regular assessments are met. ### Resources - Expected resource impact: - Staff’s participation in both regular and follow-up assessments led by other bodies should have a limited impact on the overall resource envelope for AML/CFT. - Given the exceptional basis for participation, the projected resource impact compared to overall existing AML/CFT resources should be limited. - Estimated resource needs for participation: - Any resources needed to participate in an assessment of other bodies would be approximately equivalent to an average of 0.5 full-time equivalent, during the period of the 12–14 months that an assessment in average takes, and would be allocated through a limited adjustment of existing work. - Compared to Fund-led assessments, which generally consist of three staff working intensively over the period of the assessment, the employment of up to seven external experts during this period, and additional costs such as travel and accommodation, participation in other bodies’ assessments is less resource-intensive. - Staff participation in assessments of other bodies would be considered technical assistance, as is the case for regular Fund-led assessments. ### Proposed Decision (summary of conditions and safeguards) - Staff may, in exceptional circumstances, join AML/CFT assessments, including follow-up assessments, led by other assessor bodies, provided that the following conditions are met: - The assessed country meets one of the following criteria: - (i) the assessed country has strong financial, trade, economic, or legal linkages with a country or countries that are members of another FSRB, and the FSRB of the assessed country does not necessarily have the Fund’s global perspective and expertise, or - (ii) the Fund has a particular interest in or expertise on a financial integrity-related issue in the assessed country, where such issue is determined to be macro-relevant. - The following safeguards are in place: - Fund staff’s participation in an assessment is explained and delineated by a disclaimer in the assessment report, and - Fund can pull out from an assessment if reputational and other risks arise that in the view of staff cannot be adequately mitigated. *IMF staff participation in AML/CFT assessments led by other bodies (excerpt).* ### EXECUTIVE SUMMARY __________________________________________________________________________ 4 ### EXECUTIVE SUMMARY ### Introduction and context - The Fund’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Strategy was last reviewed by the Executive Board in November 2018. - At the 2018 Review Directors agreed that staff would lead, at a minimum, one to two assessments per year. - Except for the pilot of 2014/2015, Fund staff has not participated in assessments led by other AML/CFT assessor bodies. - The global AML/CFT assessment architecture involves multiple assessor bodies: the Financial Action Task Force (FATF) and FATF-Style Regional Bodies (FSRBs), which accept Fund-led assessments as mutual evaluations. ### Rationale for exceptional participation by Fund staff in assessments led by other bodies - Fund staff participation is motivated by the Fund’s interest in ensuring countries are assessed correctly and receive appropriate policy advice because AML/CFT assessments: - Feed into the Fund’s surveillance work. - Inform program conditionality. - Support capacity development. - Fund staff already engages in quality and consistency processes, including: - Participation in select external reviews of assessments as external reviewer. - Contribution to assessor training, country training, and review and discussion of reports. - Despite these efforts, there remains scope to improve assessment quality and consistency: - To date, 12 out of 85 published assessment reports (14 percent) were initially not cleared by the FATF after adoption by the authoring FSRB. - The number of assessment reports held up after approval (as of mid-October 2019) by assessor body: APG 6 out of 14, CFATF 2 out of 7, GABAC 0 out of 0, GAFILAT 1 out of 9, EAG 1 out of 2, ESAAMLG 0 out of 8, FATF 0 out of 25, GIABA 1 out of 4, MENAFATF 1 out of 3, MONEYVAL 1 out of 13. - Staff participation on an exceptional basis could help improve the quality and consistency of assessments led by other bodies and have a positive spillover effect on other assessments. ### Proposed approach and criteria for exceptional participation - Participation by Fund staff in assessments led by other bodies should be: - Used only on an exceptional basis. - Guided by specific criteria to select which assessments to participate in. - Proposed criteria: - Cases where the assessed country has important financial, trade, economic, or legal linkages with other countries: participation justified when the FSRB of the assessed country may lack the Fund’s global perspective and expertise given strong cross-FSRB linkages. - Cases where the Fund has a particular financial integrity-related interest or expertise: participation justified when the Fund’s expertise is relevant and the issue is determined to be macro-relevant. Current examples include pressures on correspondent banking relationships and financial integrity issues related to virtual assets and virtual asset service providers. - Staff involvement should be considered alongside the Fund’s existing and ongoing role in the FATF/FSRB quality and consistency process and as external reviewer, which remains the first-choice engagement tool. ### Safeguards to mitigate reputational and other risks - Participation must include mitigating safeguards clearly communicated to the assessor body prior to the start of an assessment. - Explicit safeguards proposed: - In all cases, Fund staff’s participation in an assessment is explained and delineated by a disclaimer in the assessment report, noting that the views expressed in the report are those of the assessor and do not necessarily represent the views of the Fund, its Executive Board, or IMF Management. - The Fund can pull out from an assessment if reputational and other risks arise that, in the view of staff, cannot be adequately mitigated. - The 2014/2015 pilot provides a template showing how staff can participate while complying with staff rules: staff were not subject to FATF/APG instructions and the final report was not considered a Fund report. ### Current policy background and operational implications - Historical evolution: - In 2002, the Board endorsed adding FATF standards to the Fund’s operational work and approved a 12-month pilot program of Fund/Bank assessments. - In 2004 Directors agreed AML/CFT assessments should be a regular part of the Fund’s work. - In 2002 Directors endorsed two approaches: (i) Fund/Bank staff-led assessments; and (ii) FATF/FSRB-led assessments without Fund/Bank staff. - The 2014/2015 pilot involved Fund staff participation in FATF/APG assessments (Australia (jointly with APG), Belgium, Norway, Spain, and APG assessment of Malaysia) while maintaining staff rules. - Updating the policy to allow exceptional participation would require: - Clear criteria and safeguards (as above). - That experiences with the policy and these criteria/safeguards be reviewed as part of the next regular review of the Fund’s AML/CFT strategy. *International Monetary Fund — FUND STAFF PARTICIPATION IN AML/CFT ASSESSMENTS BY OTHER BODIES — EXECUTIVE SUMMARY* ### 15. As a mitigating safeguard, if Fund staff participates in an assessment, a disclaimer ### 15. As a mitigating safeguard, if Fund staff participates in an assessment, a disclaimer ### Disclaimer and Preface - The common template for all assessment reports provides that the preface includes: - the list of assessors, - their delegation (member, or observer country, or organization), - official function, - respective roles and responsibilities in the assessment (e.g., financial supervision expert). - It is proposed that the preface of the report would include a disclaimer in a footnote that: - "the views expressed in the report are those of the assessor and do not necessarily represent the views of Fund staff, its Executive Board, or IMF Management." - Where Fund staff participates in an assessment, a disclaimer would be included in the report to explain and to delineate staff’s role in the assessment. ### Assessment team composition and limitations - Assessment teams generally consist of around 8–10 persons to cover the 11 areas of effectiveness that are assessed. - Each assessor covers a particular area; due to the degree of specialization: - it is not possible for assessors to take over assessment responsibilities from other team members, - an assessment is ultimately considered the work product of the assessment team as a whole. - This specialization limits the degree of influence that a single assessor can have over the quality and consistency of the assessment report as a whole. - If there are deep structural quality and consistency issues with assessments by a particular FSRB, Fund staff should exercise caution in considering engagement in that FSRB’s assessments, since such structural issues would likely not be addressed solely through participation of Fund staff. ### Safeguards allowing Fund staff to pull out of an assessment - Staff should be able to pull out from an assessment if reputational and other risks arise that, in the view of staff, cannot be adequately mitigated. - Proposed safeguards for pulling out if staff determines one or more of the following are met: - The assessment or its process is inconsistent with the FATF standards, methodology, or assessment procedures. - There is interference in the assessment process including either by the secretariat of the assessor body or by any country, or any other form of undue pressure that constrains the staff in a manner that undermines their duties and responsibility as Fund staff. - There is a lack of training or knowledge on the side of the assessment team (secretariat or assessors), to an extent that it becomes evident that it is unlikely that the team is able to produce a report of the required quality and consistency, despite the advice provided by Fund staff on the team. - Note: independence of assessors is an important feature of FATF’s assessment procedures; assessors’ duty is to produce an independent report as a group. ### Decision process and communication when pulling out - A decision to pull out of a given assessment would need to be carefully considered and transparently communicated. - The decision to pull out would be approved by Management. - Staff would work with the assessor body to attempt to remedy issues prior to any decision to disengage. - The FATF and the relevant assessor body would be informed of the reasons for the disengagement. - The decision to pull out may take place at any time during an ongoing assessment process (which takes at a minimum 12–14 months) but preferably at an early stage to avoid undue disruption. - Pulling out would result in removing the name of the Fund staff from the list of assessors in the report and other associated references to the Fund. ### Application of the framework to follow-up assessments - The same framework applies to participation in FATF/FSRB follow-up assessments, which are distinct from regular assessments. - Follow-up assessments are undertaken based on the same set of FATF standards, common assessment methodology, and assessment procedures. - The scope of follow-up assessments is limited (e.g., to a maximum of about four areas, initially rated as insufficiently effective), focusing on key findings and recommended actions from the regular assessment. - Similar quality and consistency procedures are in place as for regular assessments. - The FATF has commenced the first follow-up assessments for countries whose regular assessments were adopted five years ago; FSRBs plan to follow in due course. - The Fund may lead such follow-up assessments (this has not happened yet); Fund staff may be asked to participate in a follow-up assessment of another body only if conditions and safeguards that apply to exceptional participation in regular assessments are met. ### Resources - Staff’s participation in both regular and follow-up assessments led by other bodies should have a limited impact on the overall resource envelope for AML/CFT. - Given the exceptional basis for participation, the projected resource impact compared to overall existing AML/CFT resources should be limited. - In the exceptional case that this tool is used, any resources needed to participate in an assessment of other bodies would be approximately equivalent to an average of 0.5 full-time equivalent, during the period of the 12–14 months that an assessment in average takes, and would be allocated through a limited adjustment of existing work. - Compared to Fund-led assessments, which generally consist of three staff working intensively over the period of the assessment, the employment of up to seven external experts during this period, and additional costs such as travel and accommodation, participation in other bodies’ assessments is less resource-intensive. - Staff participation in assessments of other bodies would be considered technical assistance, as is the case for regular Fund-led assessments. ### Proposed Decision (summary of conditions and safeguards) - Staff may, in exceptional circumstances, join AML/CFT assessments, including follow-up assessments, led by other assessor bodies, provided that the following conditions are met: - The assessed country meets one of the following criteria: - (i) the assessed country has strong financial, trade, economic, or legal linkages with a country or countries that are members of another FSRB, and the FSRB of the assessed country does not necessarily have the Fund’s global perspective and expertise, or - (ii) the Fund has a particular interest in or expertise on a financial integrity-related issue in the assessed country, where such issue is determined to be macro-relevant. - The following safeguards are in place: - Fund staff’s participation in an assessment is explained and delineated by a disclaimer in the assessment report, and - Fund can pull out from an assessment if reputational and other risks arise that in the view of staff cannot be adequately mitigated. *IMF staff participation in AML/CFT assessments led by other bodies (excerpt).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020011.pdf_