Part Thirty-Three: Mutual Evaluation Process
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 proliferation of weapons of mass destruction”. The FATF has established nine FATF Styled Regional Bodies (FSRBs) worldwide, such as the Caribbean Financial Action Task Force (CFATF), tasked with the responsibility of implementing its measures and policies on its members. The main policy of the FATF when conducting mutual evaluations of all member jurisdictions is to assess their money laundering/terrorist financing/proliferation of weapons of mass destruction framework.
The FATF and FSRBs conduct mutual evaluations of its members by assessing the country’s level of implementation of the FATF 40 Recommendations on an ongoing basis. A mutual evaluation report is then finalized on the assessed country by the assessors. This report provides an in-depth description and analysis of a country’s anti-money laundering/countering the financing of terrorism regime and make recommendations to enable the country to further strengthen its systems.
Mutual Evaluations seek to analyze the laws of a country for a conclusion to be made as to the level of compliance with the standards imposed by the FATF. These standards are reflected in what is known as the FATF 40 Recommendations which outline the minimum requirements for compliance by members. The most critical component of the evaluation is the onus placed on the assessed country to demonstrate that it has an effective framework to protect the financial system from money launderers and terrorist financier’s abuse. Protecting the financial system may take the form of coordination mechanisms across competent authorities or the provision of guidance/training to financial institutions or other business activities regarding their legal requirements.
Saint Lucia’s last evaluation was in 2008 and focused solely on technical compliance as opposed to effectiveness. Saint Lucia is currently undergoing the 4th Round Mutual Evaluation process which includes an on-site visit by the CFATF Assessors from September 16-27, 2019.
During the on-site visit between September 16-27, 2019, assessors from the CFATF will be in Saint Lucia to conduct an ‘on-site evaluation’. During the course of their stay, it is mandatory that they meet and conduct interviews with all key public and private stakeholders in an attempt to inter alia, ascertain verification of the information provided by the country on its effectiveness.
Consequences of a Poor rating
Listed below are circumstances which may take effect, as a result of a poor rating of an assessed country.
• De-risking – financial institutions may choose to close the accounts of clients perceived as high risk for money laundering or terrorist financing abuse, for example money service businesses, non-profit organizations and foreign embassies.
• Loss of Correspondent Banking relationships – a correspondent bank provides services on behalf of another bank or respondent bank. A country may lose its correspondent banking relationships if it is perceived as high risk and non-cooperative in the fight against money launderers/terrorist financiers. A correspondent bank may choose to cut business ties with the respondent bank of the jurisdiction, as further cooperation will affect its own reputation.
• Reputational Risk – a poor evaluation can impact the impression of other countries on the assessed country. The country will be viewed to have deficiencies in their money laundering/terrorist financing systems which may deter potential foreign investment and trade.