IMF Executive Board Discusses the Fund’s Strategy on Anti-Money Laundering and Combating the Financing of Terrorism

February 4, 2019

On November 19, 2018, the Executive Board of the International Monetary Fund (IMF) discussed the staff report: “Review of the Fund’s Strategy on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).”

The staff report provides an overview of the Fund’s AML/CFT program, since the last review conducted in 2014 and seeks the endorsement of the Executive Board to continue on the basis of the directions given in 2014, with one minor adjustment proposed in relation to Fund-led AML/CFT assessments.

The staff report takes note of the multipronged approach which has enabled the Fund to address issues related to money laundering, terrorist financing, proliferation financing, and broader financial integrity-related issues, including developing and emerging issues such as those related to correspondent banking relationships (CBR) and financial technology (Fintech). It identifies staff’s efforts to increase synergies between the different workstreams in order to strengthen the efficiency and impact of the Fund’s AML/CFT work—including in surveillance, Fund-supported programs, Financial Sector Assessment Programs, and Fund’s capacity development (CD) activities, including AML/CFT assessments and other related policy work. The staff report suggests that while the Fund’s AML/CFT program remains appropriate, in order to expand its reach and maximize the impact of the Fund’s overall involvement in AML/CFT assessment work, consideration should be given to shift to fewer Fund-led assessments but increase staff’s participation in the quality and consistency review of other assessment, and training efforts. Going forward, the Fund will continue to cooperate in these areas with the World Bank, the Financial Action Task Force (FATF), the FATF-Style Regional Bodies (FSRBs), and other stakeholders.

Executive Board Assessment [1]

Executive Directors welcomed the opportunity to review the Fund’s strategy on AML/CFT. They agreed that the Fund’s work has significantly contributed to the international community’s response to money laundering, the financing of terrorism and of the proliferation of weapons of mass destruction, and financial integrity concerns more generally. They welcomed the Fund’s contributions to the global AML/CFT policy agenda and encouraged continued cooperation with the World Bank, the FATF, the FSRBs, and other stakeholders.

Directors welcomed the multipronged approach taken in addressing members’ financial integrity issues and agreed that the Fund’s AML/CFT strategy remains appropriate in addressing the risks and providing tailored advice to members in all relevant workstreams. They also welcomed staff’s efforts in increasing the synergies between different workstreams to strengthen the efficiency and impact of the Fund’s AML/CFT work. Looking ahead, a number of Directors saw a need to have better data to assess more comprehensively the effectiveness of the Fund’s work in this area.

Directors noted that deficiencies in a country’s AML/CFT regime can have important implications for macroeconomic and financial stability. They supported the direction taken by staff in addressing financial integrity issues in Article IV consultations and Fund-supported programs. They encouraged staff to continue its efforts to integrate financial integrity issues into Fund surveillance in line with the 2012 Guidance Note and the Integrated Surveillance Decision, and in Fund-supported programs when the requirements of the Guidelines on Conditionality are met. Directors emphasized the continued need for evenhandedness in the coverage of these issues in surveillance and Fund-supported programs, in a complementary manner with the framework for enhanced Fund engagement on governance, and paying due regard to countries’ institutional, capacity, and resource constraints.

Directors reaffirmed that updates on AML/CFT issues are an important part of the FSAP, and noted the complementarity of staff’s work on financial integrity issues in the FSAP and Article IV consultations. They welcomed the flexibility exercised with respect to the scope of the AML/CFT update, and staff’s efforts to supplement, where necessary, the information derived from AML/CFT assessment reports. In this regard, a number of Directors stressed the need to avoid duplication of work and to be mindful of the resource implications for the Fund and the country involved. Directors noted that going forward, greater reliance on assessment reports is expected as more become available.

Directors agreed that AML/CFT assessments are more complex and resource intensive than originally anticipated, mainly due to the 2013 FATF methodology for assessing the effectiveness of AML/CFT measures. They noted that, with the expansion of the FATF and the network of FSRBs in recent years, the Fund has increasingly drawn upon the FATF/FSRBs’ assessments for purposes of its own work, in application of the burden-sharing arrangements between the Fund, the World Bank, and the FATF/FSRBs. Directors welcomed the steps taken by the FATF/FSRBs to strengthen the review mechanisms and stressed the continued importance of ensuring the adequate quality and consistency of assessment reports across the range of assessor bodies. In this context, they broadly agreed with staff’s proposal to continue the current approach of conducting a minimum of one to two assessments per year while maintaining increased participation in global quality and consistency review mechanisms and in assessment related training. A number of Directors urged staff to exercise flexibility and undertake additional assessments as demand warrants, particularly in countries with systemically or regionally important financial sectors or that face high money laundering or terrorist financing risks. A number of Directors also felt strongly that Fund staff should participate, on an exceptional basis, in assessments led by other AML/CFT assessor bodies.

Directors welcomed the CD activities provided by staff to members’ authorities on AML/CFT issues. They emphasized the importance of ensuring the efficiency and agility of the Fund’s AML/CFT CD program to meet the increasing and evolving demand from the membership. They saw a role for CD in enhancing the effectiveness of implementation of AML/CFT regimes. They welcomed staff’s efforts to prioritize CD engagement in low capacity countries, support surveillance and Fund-supported programs through CD activities, and coordinate with other AML/CFT CD providers to avoid duplication of work. They also supported staff’s efforts to adapt and upgrade the CD program to address current and emerging issues, in particular those related to pressures on CBR and to Fintech. A few Directors also called for an increase in resources for the Fund’s CD program for countries facing an imminent risk of withdrawal of CBR due to weaker AML/CFT frameworks. Directors took note of the need to re-evaluate the current CD funding model in the medium term to ensure that it remains appropriate, sustainable, and in line with the Fund’s overall CD strategy. Directors looked forward to the results of the evaluation of the effectiveness of Phase II of the Thematic Fund. A few Directors also called for increased Board engagement in Fund AML/CFT CD to provide strategic guidance on both internally and externally financed activities.

Directors commended staff on its efforts to address financial integrity considerations in the context of broader current and emerging policy issues, such as with regard to CBR, Fintech, and illicit financial flows.

Directors looked forward to greater information on the resource implications of the increased demand for financial integrity work in all workstreams, which could require an incremental increase in resources over the medium term.

Directors noted that the next review of the AML/CFT program would be expected to be completed within the next five years.

[1] An explanation of any qualifiers used in summings up can be found here: .

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