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Bank Supervision | Combat Against Money Laundering and Financing of Terrorism in the World

Combat Against Money Laundering and Financing of Terrorism in the World

Cognizant of the real danger of organised crime at the global level, the international community has developed a strategy of combating the most dangerous forms of crime, such as trafficking in narcotics, firearms, human beings, etc, all of these activities being inextricably linked to money laundering. To enhance the efficiency of combating money laundering and financing of terrorism in member states, the United Nations and European Union have adopted the following documents:

United Nations

1) Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances – Vienna Convention
2) Convention Against Transnational Organised Crime
3) Convention Against Corruption
4) 1999 International Convention for the Suppression of the Financing of Terrorism (Terrorist Financing Convention)

European Union

1) Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, 1990
2) Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (so-called Third Directive)
3) Commission Directive 2006/70/EC laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of politically exposed person and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis

Moneyval

Council of Europe’s MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) was founded in 1997 to ensure, through the process of mutual evaluation, that its member states have in place effective systems to counter money laundering and terrorist financing and comply with relevant international standards in the field. MONEYVAL evaluation procedures involve the collection of information through a questionnaire, which is followed by an on-site country visit by a team of evaluators elected by the MONEYVAL Secretariat. The visit leads to drafting of the report on harmonisation of the country’s legislation and practice with international standards. After several rounds of consultation, the final version of the report is adopted at a plenary meeting held four times a year. Each report describes and analyses anti-money laundering and combating the financing of terrorism (AML/CFT) measures in place in the country, and provides recommendations on strengthening some aspects of the system. MONEYVAL possesses mechanisms of coercing member states to implement its recommendations and apply other measures at the government level. These mechanisms include the requirement of regular reporting to MONEYVAL on the progress achieved, as well dispatching a high-level diplomatic mission to the member state or the state’s exclusion from membership of the Council of Europe. The reports adopted by MONEYVAL are public and are used in estimates of financial stability and safety of investing in some countries. The International Monetary Fund and World Bank receive MONEYVAL’s reports to prepare their own analyses and reports.

A MONEYVAL team of evaluators visited Serbia from 10 to 16 May 2009 within the third round of evaluation (detailed evaluation) of measures and actions taken by the Republic of Serbia to prevent money laundering and terrorist financing. The evaluation report was adopted at MONEVAL’s 31st plenary meeting held in the Council of Europe, in Strasbourg, on 9 December 2009. The report sets out Serbia’s levels of compliance with the FATF (Financial Action Task Force) 40 plus 9 Recommendations and delineates measures to be taken. Serbia is required to implement the measures proposed until December 2010 when MONEYVAL will consider Serbia’s progress report.

Serbia’s first progress report in the field of anti-money laundering and terrorism financing was examined and adopted at the 34th Moneyval plenary meeting, held on 7–10 December 2010.

At the 40th Moneyval plenary meeting, held on 3–7 December 2012, the second progress report was examined and adopted as part of the third cycle of evaluation measures and actions which the Republic of Serbia is undertaking in terms of anti-money laundering and terrorism financing.

NBS representatives who participated in the plenary session as part of the Serbian delegation responded to a series of questions pertaining to on-site and off-site supervision  based on the assessment of the risk of money laundering and terrorism financing; establishment of a system for continuous monitoring of supervision findings; and amendments to financial leasing regulations.

MoneyVal’s Annual Report for 2012 has been published on the website of the Council of Europe.

FATF recommendations are the basic standards used for evaluating harmonisation with AML/CFT criteria.

FATF is an inter-governmental body, established in Paris in 1989, whose purpose is the development and promotion of policies to combat money laundering and terrorist financing, as well as to monitor the implementation of AML/CFT measures in member countries. In pursuing its activities, FATF cooperates with other international bodies involved in AML/CFT activities, such as MONEYVAL.

On 16 February 2012, FATF consolidated the existing 40 recommendations for combating money laundering and nine special recommendations on terrorist financing, as well as announced new FATF Recommendations. In addition to integrating the topics covered so far, the new recommendations also encompass the suppression of financing the production of weapons of mass destruction and laundering of money acquired through corruption and tax offences, as well as deal with risk assessment at the national level. 

Basel Committee

 The Basel Committee on Banking Supervision provides a forum for international cooperation and enhancement of the quality of banking supervision worldwide. The Committee has promoted 25 Core Principles for Effective Banking Supervision, including:

  • Principle 7 – risk management process
    Supervisors must be satisfied that banks and banking groups have in place a comprehensive risk management process to identify, evaluate, monitor and control or mitigate all material risks.
  • Principle 18 – abuse of financial services
    Supervisors must be satisfied that banks have adequate policies and procedures in place, including strict “know-your-customer” rules that promote high ethical and professional standards in the financial sector and prevent the bank from being used, intentionally or unintentionally, for criminal activities.

The Basel Committee has also adopted the Paper on Customer Due Diligence for Banks, covering the adoption of “know-your-customer” rules in banks.