FATF vows tougher rulings of non-bank remittances

FATF vows tougher rulings of non-bank remittances

Agence France-Presse, Singapore

Two major global finance watchdogs pledged on Friday to toughen regulations on underground cash remittances and wire transfers in a bid to choke funding for terrorist groups and fight money laundering.

The Financial Action Task Force (FATF) and its regional counterpart, the Asia Pacific Group, highlighted after meeting here that there had been evidence of non-bank remittance channels being used to fund terror activities in Asia and other parts of the world.

However, they admitted it was difficult to monitor the money flows because these took place outside the banking system.

"One of the topics that we have actually talked about is the alternative remittance systems and regulation," FATF executive secretary Alain Damais told reporters after the three-day meeting ended.

"And that is going to be one of the issues that we have decided to make some further work on. We will especially focus on an implementation package."

The Paris-based FATF is the anti-money laundering watchdog of the Organization for Economic Cooperation and Development (OECD), the developed economies grouping. It promotes policies and creates regulations to combat money laundering and terrorist financing.

Thirty nations, including the United States, Australia and Britain, as well as the European Commission and the Gulf Co- operation Council are FATF members, and have to adhere to the organization's regulations.

Rick McDonell, head of the Asia Pacific Group's secretariat, said their organization and the FATF had agreed to work more closely to strengthen the fight against illegal money flows.

Regulating alternative remittance systems, in which funds are carried by couriers across borders or sent through unregistered dealers "is a particularly big challenge," McDonell told reporters.

"One of the challenges for us in the Asia-Pacific region has been to identify who these dealers are because they are often not identifiable and not regulated by the government."

Another challenge is that the costs of using alternative remittance systems are cheaper compared to banks, making them more attractive.

However, he said that Pakistan had shown that this segment can be regulated by identifying the dealers, putting them under supervision and handing out sanctions when laws are violated.

The two groups said they had no data of how much money passes through the non-banking system but McDonell said a one-time study done by the Asia Pacific Group in 2003 covering only a six-month period showed US$8.0 billion passing through the non-bank remittance links.

The FATF and Asia Pacific Group also agreed to continue trying to convince governments worldwide to adopt a standard that monetary wire transfers must identify both the sender and the receiver of the funds.

McDonell said the majority of the countries in the Asia Pacific had yet to implement this standard although they had committed to do so.

"In the Asia Pacific, we need ... much more practical cooperation, learning the tools, improving enforcement mechanisms, making the border patrol people, immigration and customs much more aware of their responsibilities," he said.