The Financial Action Task Force (FATF) recently announced the Mutual Evaluation of Ecuador and the Follow-up Report on The Bahamas from FATF Partners GAFILAT and the Caribbean Financial Action Task Force (CFATF) respectively. The first was a new assessment that sets out the effectiveness of Ecuador’s measures to tackle money laundering and terrorist financing and its compliance with FATF Recommendations.
The second detailed the progress that The Bahamas had made in its technical compliance with the FATF 40 Recommendations and the upgrades that were agreed to the ratings. The jurisdiction is now rated as Compliant on 17 Recommendations and Largely Compliant on 23 Recommendations.
Notable, was the designation of these two FSRBs as FATF Partners, 24 years after the FATF was established in 1989, and 21 years after the creation of the first FSRB in 1992.
Given this announcement, it would not be surprising if similar declarations were made in relation to the other seven FSRBs namely APG, EAG, ESAAMLG, GABAC, Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), Middleeast and North Africa Financial Action Task Force (MENAFATF), and MONEYVAL. But what does this new title FATF Partner mean? At this time, it is uncertain whether it is significantly different from the FATF-created Associate Member status that the CFATF had reached in February 2008 and GAFILAT in June 2010.
Associate membership back then, was designed to give FSRB members equal access to information and input to FATF meetings, documents, discussions, and decision-making processes, which would have assisted the work of both FATF and FSRBs.
The FATF October 2012 document – High-Level Principles for FATF and FSRBs (The High-Level Principles) - sets out in more detail the nature of the relationship between the entities.
In 2023, a decade or so later the status is now FATF Partner. What is not immediately clear is whether it only applies to some FSRBs or to all. Or, whether it is granted in stages after certain criteria and milestones are met as was the case with the Associate Membership.
In outlining the new designation, the FATF states, “Countries and jurisdictions are assessed with the help of nine FATF Associate Member organisations and other global partners, the International Monetary Fund, and World Bank.”
In its ordinary sense, a partnership is said to provide additional knowledge, skills, experience, and less financial burden. In a partnership, you must split the profits if it is a business, between the partners who make decisions together. Ownership and control are combined, and the Articles of Partnership would detail the structure, and the decision-making process, where any issue is discussed openly and fully in a transparent and democratic way, where partners must vote one way or the other.
The High-Level Principles, do not make any provision for FSRB Members, Associate Members, or FATF Partners to vote on decisions.
What is made clear, is that the FATF decision-making is limited to the FATF Plenary and that FSRB members only have access to information and input to FATF meetings, documents, discussions, and decision-making processes.
In fact, the objectives of the FATF Singapore Presidency 2022-2024 lists as one of its four objectives the Deepening of FATF’s partnership with FSRBs.
This partnership is fleshed out to mean:
“…working closely to chart out a roadmap for capability and capacity development with a view to strengthening the Global Network to fight ML and TF, which will take account of the specific needs of each FSRB and current level of expertise. The roadmap will also focus on assisting FSRBs to complete the 4th Round, formalise regular dialogue, identify specific areas to improve, to aid preparations for the next round of evaluations and support broader strategic cooperation.”
In essence the FATF in 2022 restated some of the objectives of 2008-2012, when the Associate member idea was launched.
The nine FSRBs, Associate Members, and FATF Partners extend over 169 countries that are committed to the effective implementation of the FATF Recommendations for the protection of the international financial system.
The nine FSRBs, Associate Members, and FATF Partners have agreed as required by the High-Level Principles under the heading ‘Mission and endorsement’ in paragraph (v) that they should “commit, actively support and participate in the FATF ICRG process,” first known as the Non-Cooperative Countries and Territories (NCCT) initiative when launched in 2000.
This process has resulted in the blacklisting, or greylisting of many FSRB members, with highly detrimental economic, financial, and reputational implications, including the “unintended consequences” of de-risking/loss of correspondent banking relationships.
In 2023, the 37 members of the FATF, an inter-governmental body, will continue to make decisions on behalf of, the 169 countries in the nine FSRBs, Associate Members, and FATF Partners, as they have been designated.
Given the current realities, FSRBs, Associate Members, and FATF Partners should assess their current levels of compliance, and seize any and all immediately available opportunities to enhance their levels of compliance, which will undoubtedly strengthen their voice in the global advocacy for change.