ANNUAL REPORT 2015-2016 - FATF-GAFI.ORG

1 ANNUAL REPORT . 2015 - 2016 . FINANCIAL ACTION TASK FORCE. The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard. For more information about the FATF, please visit the website: 2017 FATF/OECD. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue Andr Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: Photocredits listed on page 2. Contents 5 Je-yoon Shin, FATF President 2015 - 2016 . 9 Introduction, David Lewis, FATF Executive Secretary 13 FATF priority: Terrorist Financing 19 Money Laundering & Terrorist Financing Risks, Trends and Methods 23 Setting the International Standards 31 Monitoring Compliance 37 High-Risk and Non-Cooperative Jurisdictions 43 Dialogue with the Private Sector 49 Strengthening the Global AML/CFT Network 55 Financial Statement 56 Annex 1.)

2 Global Network: Member Jurisdictions & Assessing Bodies 58 Annex 2. FATF Members, Associate Members and Observers 61 Annex 3. FATF Publications and Speeches 2015 - 2016 . FATF ANNUAL REPORT 2015 - 2016 1. Photocredits Page 3 - UN Photo; Page 5 - Korea FSC; Page 6 - FATF, UN Photo, World Bank; Page 7 - UN Photo, Ministry of Finance Japan, FATF; Pages 9, 24, 44 and 52 - FATF; Page 10 - UN Photo; Page 17 - Ministry of Finance Japan;. Pages 18, 30, 36, 42, 48 and cover - Thinkstock 2 FATF ANNUAL REPORT 2015 - 2016 . - FATF. More and more countries have adopted legislation to criminalize terrorist financing and build and strengthen regulatory systems to counter funding flows to terrorists. The focus and guidance of the Financial Action Task Force has expanded to include the spectrum of methods to fund terrorism. Just as terrorist groups are innovating and diversifying, the international community must stay ahead of the curve to combat money-laundering and the financing of terrorism. Ban Ki-moon United Nations Secretary-General (2007- 2016 ).

3 From Secretary-General's remarks to Security Council meeting of Finance Ministers on Countering the Financing of Terrorism , New York, 17 December 2015 . FATF ANNUAL REPORT 2015 - 2016 3. FATF - . The greatest asset of the FATF is the expertise and integrity of its members, associate members and observers. Je-yoon Shin, FATF President 2015 - 2016 . 4 FATF ANNUAL REPORT 2015 - 2016 . Je-yoon Shin - FATF President 2015 - 2016 - FATF. Je-yoon Shin - FATF President 2015 - 2016 . It is my pleasure to introduce the ANNUAL REPORT Special Plenary Meeting for the first time since 9/11. 2015 - 2016 of the Financial Action Task Force (FATF) The discussions at this meeting informed a renewed, under the Korean Presidency. The FATF had a number consolidated FATF Strategy on combating terrorist of important agendas over the past year, including financing. As the FATF President, I was invited to enhancing efforts in counter-terrorism financing, address the Finance Ministers of the UN Security addressing challenges identified in the fourth Council on its extraordinary session in December.

4 Round of mutual evaluations, and tackling capacity At this meeting, the Ministers unanimously adopted constraints, among others. It has been a privilege Resolution 2253, which requires all countries to to represent the FATF during the pivotal juncture fully and effectively implement the FATF Standards in improving our counter-terrorism measures. in order to combat the financing of terrorists and Despite the challenges and its limited resources, the terrorist organisations, especially ISIL. FATF successfully demonstrated its strength and responsiveness while effectively cooperating with the Terrorist financing has been an on-going item on FATF's global network. The greatest asset of the FATF our agenda throughout the year. In response to a call is the expertise and integrity of its members, associate by the G20 ministers in early 2015 , we successfully members and observers, who willingly uphold these completed a survey of counter-terrorist financing values to the highest standards.

5 It was my honour measures in 194 countries around the globe, with the working with them during the past 12 months. crucial assistance of the FATF-Style Regional Bodies (FSRBs). The results of the survey showed that most Countering terrorist financing has been the top jurisdictions criminalise terrorist financing and priority during the Korean Presidency. The tragic implement targeted financing sanctions in accordance terrorist attacks in Paris, Brussels, and other parts with the FATF Standards, which reaffirmed the FATF's of the world called for swift and co-ordinated cross- effectiveness in promoting the international standard border action against the imminent threats posed of counter-terrorist financing (CFT) measures. The by terrorists and the underlying terrorist financing jurisdictions which did not have in place the basic mechanisms. In response, the FATF convened a legal system to criminalise terrorist financing have FATF ANNUAL REPORT 2015 - 2016 5. FATF - Je-yoon Shin - FATF President 2015 - 2016 .

6 FATF Plenary, Paris, October 2015 United Nations Security Council, World Bank Headquarters, with World Bank New York, October 2015 Managing Director and Chief Operating Officer, Sri Mulyani Indrawati, April 2016 . since passed new legislation or committed to seeking date. During the Korean Presidency, we examined the assistance from relevant experts to draft such new mutual evaluation reports of Italy, Singapore, Austria legislations. And we are still working to improve the and Canada. Through the discussions, we were able to use and effectiveness of the existing targeted financial identify many horizontal and cross-cutting issues and sanction regimes throughout the global anti-money set case examples for the future evaluations. laundering (AML) and CFT network. On the policy side, FATF published Guidance on AML/. The FATF remains alert to the evolving terrorist risks CFT-related Data and Statistics to help countries and trends. The Emerging Terrorist Financing Risks demonstrate effectiveness of their respective AML/.

7 REPORT published in October 2015 identifies threats CFT measures, which provided useful AML/CFT. and vulnerabilities posed by foreign terrorist fighters, data and statistics. Two RBA guidance papers - fundraising through social media, new payment Guidance for a Risk-Based Approach for Money or products and services, and the exploitation of natural Value Transfer Services and Guidance for a risk-based resources. Based on the findings of this REPORT , approach: Effective supervision and enforcement by terrorist financing risk indicators for governments AML/CFT supervisors of the financial sector and law and the private sector were developed. In addition, enforcement - were made available to competent the FATF Standards were revisited in order to better authorities, supervisors and market practitioners, reflect the ever-changing environment. In October greatly improving their application of the risk-based 2015 , the Interpretive Note to Recommendation 5 approach. was revised to address the threats posed by foreign terrorist fighters.

8 At the Busan Plenary in June 2016 , Despite our progress, there are remaining challenges Recommendation 8 and its Interpretive Note were as we proceed further into the fourth round of mutual revised to better protect non-profit organisations evaluations. The demanding nature of the risk-based from terrorist financing abuse. approach and effectiveness assessment has created challenges for some FATF and FSRB members who The fourth round of mutual evaluations commenced do not have enough resources or experience. As the in 2014 has been a dynamic and evolving process then-incoming President, I had made a proposal to with nine FATF member jurisdictions assessed to establish an AML/CFT training and research institute 6 FATF ANNUAL REPORT 2015 - 2016 . Je-yoon Shin - FATF President 2015 - 2016 - FATF. UN Headquarters, with UN Secretary-General G7 Japan 2016 , Finance Ministers and Central Bank FATF Plenary, Busan, Korea, June 2016 . Bank Ki-moon, New York, April 2016 Governors' Meeting, Sendai, May 2016 .

9 In Korea, namely the FATF TREIN (Training and fully implementing FATF Standards on transparency REsearch Institute), to support capacity building of beneficial ownership. I reiterated this point at the of FATF and FSRB members and to function as a G7 Finance Ministers and Central Bank Governors knowledge hub. The establishment of FATF TREIN Meeting in Japan in May 2016 . The Busan Plenary has been approved and gained wide support among decided that, as a next step, the FATF will collaborate the members. The institute will be operational in with the Global Forum on Transparency and late 2016 . Active participation of FATF members, Exchange of Information for Tax Purposes to find FSRBs and other international organisations will be ways to improve implementation of FATF Standards paramount to the success of FATF TREIN. on transparency, including the availability of the basic and beneficial ownership information, and its Engagement with the global AML/CFT network, as international exchange.

10 Well as other international bodies and the private sector has also been one of my top priorities as The FATF has also been working to ensure proper President. During the past year, Malaysia became a implementation of FATF Standards and the risk-based member of the FATF while GABAC was recognised as approach by financial institutions. The ongoing work a new FSRB representing the Central Africa region. on correspondent banking is expected to address this The co-operation and co-ordination among the global issue. network should continue to grow in the future. The partnerships with the G20, the UN and the Egmont I take this opportunity to thank the FATF Secretariat Group are growing more fruitful than ever. Private for their hard work and support throughout my sector engagement took place at a range of levels, presidential term. I wish all the best to my successor, from the ANNUAL consultative forum to on-line surveys. Mr. Juan Manuel-Vega from Spain, and trust that under his leadership, the FATF will continue to address the Going forward, the FATF should continue to challenges and succeed as the global standard-setting work to ensure full implementation of the FATF body.