FATF Report Highlights Money Laundering Trends

Immediate Release

FATF Begins Discussions with the E-Money Payment Systems Industry

For the second time since its inception, the Financial Action Task Force (FATF), the world’s leader in promoting anti-money laundering controls, has released a public report on existing money laundering trends around the globe. The report also contains an annex which discusses the money laundering implications of emerging payment systems, such as electronic money (e-money) and Internet transactions.

FATF, a 26-nation organization created by the G-7 to address the global problem of money laundering, developed the report as part of its 1996-97 typologies exercise. It was issued in Paris at the conclusion of FATF’s Plenary meeting.

The meeting of experts on money laundering typologies has been an annual feature on the calendar since the beginning of FATF in 1989. The purpose of this meeting is to bring together ideas and experiences regarding the phenomenon of money laundering and then to develop and articulate a worldwide view of the actual state of this activity. FATF began producing a public report on these findings last year.

"This exercise plays a critical role in the overall FATF effort. In no other forum can we focus not only on the size and nature of the problem but also on how well we are doing -- throughout the world -- at confronting it," said Stanley E. Morris, Director of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) and Chairman of the 1996-97 FATF experts group on typologies which developed the report. "This year’s assessment is particularly significant as it represents the first time this 26-nation group has come together not only to review existing money laundering issues but also to discuss and identify with the financial industry the potential implications of new technologies as it relates to money laundering."

In November, FATF invited experts from this new and rapidly developing industry to meet as part of the Typologies Exercise to discuss the implications of such technologies in the fight against money laundering. During that session, FATF was able to develop a first consensus on the money laundering potential for these new technologies and has articulated these findings as part of the report.

"The participants agreed that the technology is still in its infancy and to date, has been designed for low value consumer/retail transactions," said Morris. "However, FATF has positioned itself in a pivotal role to work in partnership with international developers, the law enforcement community, and the financial services sector, to ensure these systems are developed in ways that minimize their potential abuse by criminals."

A general observation drawn from the typologies exercises is that given the global nature of the money laundering phenomenon, geographic borders have become increasingly irrelevant. Launderers tend to move their activity to jurisdictions where there are few or weak anti-money laundering countermeasures. Other highlights addressed in the report relate to the following issues:

  • Traditional money laundering techniques (smurfing, wire transfers, bank drafts for example) continue as prominent laundering methods. Currency smuggling, also a traditional method, continues to increase due to effective counter-money laundering measures enforced in banks and other financial institutions.
  • Drug trafficking remains the largest single generator of illegal proceeds; however, non-drug related crime (various types of fraud, smuggling and organized crime offenses) is increasingly significant.
  • Both within and outside of the FATF nations, there is continued momentum to expand, refine or establish outright the necessary anti-money laundering legislation to respond to the threat of money laundering, including the growing role of Financial Intelligence Units (FIUs). These organizations detect criminal abuse of financial systems by criminals and ensure adherence to laws against financial crime. (For example, 15 of the FATF countries were represented at the Typologies Exercise by their FIUs.)
  • A continuing shift from banking institutions to non-bank financial institutions (bureaux de change or money remitter businesses) to launder money reflects the increased level of compliance by banks with anti-money laundering measures.

Copies of the report are available from FinCEN by calling: (703) 905-3770. Additional information is also available from the FATF Secretariat in Paris by calling: 331 45 24 79 45.