Roy Cullen, M.P.

World Bank, GOPAC, APNAC and

Parliament of Tanzania

Financial Market Integrity: Anti-Money Laundering and

Combating the Financing of Terrorism Workshop Arusha, Tanzania

Wednesday, September 20, 2006

Notes for Hon. Roy Cullen, M.P. House of Commons, Canada

The Fight Against
Money Laundering

Good morning ladies and gentlemen
Acknowledge Latifah Merican Cheong, Emiko Todoroki and Stuart Yikona of the World Bank and thank APNAC and the Parliament of Tanzania for hosting the meeting.
Will go through my presentation quickly so we can focus later on they key issues you would like to pursue (different countries in different stages with respect to the fight against money laundering).
My main qualification is that I am a parliamentarian who is actively involved with GOPAC, so I will approach the topic from this perspective.
Like you, I need to be concerned about public perceptions and public opinion.
Not a technical expert…..
As Parliamentary Secretary to Canada’s Minister of Finance from 1999 to 2001, I had the responsibility and honour to shepherd our government’s anti-money laundering legislation through our parliament.
named “The Proceeds of Crime (Money Laundering) and Terrorist Financing Act
created the Financial Transactions & Reports Analysis Centre, or FINTRAC -> Canada’s FIU (Financial Intelligence Unit)
GOPAC (Global Organization of Parliamentarians Against Corruption) has asked me to lead the fight against money laundering (specifically how it relates to corruption).

Development vs. implementation – sometimes design of AML can hinder implementation.
Money laundering is BIG business (IMF statistic 2%-5% of global GDP (very rough estimate).
KPMG estimate $500 billion to $1 trillion annually
Heightened interest in terrorist financing, but money laundering been around for a long time – associated with organized crime –drugs/ corruption and tax evasion, and more recently, terrorist financing.

Why is the fight against money laundering so important?

Size and scope of money laundering
Motivation for laundering money pre and post terrorists activities, drug money, corrupt money, tax evasion
Corruption and money laundering threats to international security
proceeds of crime

Money laundering is part of the puzzle in the fight against corruption.
Just as bribery and corruption have a demand and supply side (i.e. those who offer bribes and those who accept them) so too is corruption facilitated when the flight of corrupt funds goes unheeded or undetected.
Corruption everywhere (including in Canada). Transparency International ranks countries by degree of corruption on a scale of 1-10.
In the fight against corruption we need to deal with both the demand and supply side – so also must we deal with money laundering. If the laundering of corrupt money is difficult, this also will act as a disincentive to corrupt activities.
I should say GOPAC’s initially is on the large-scale corrupt activities that are practiced by political leaders and senior bureaucrats.
Money laundering activities associated with petty bribery should be our focus only after we have dealt a blow to the flight of large sums of capital by corrupt leaders.
Examples of this abound – we do not need to convince ourselves of the odiousness of these activities.
money laundering -- the processing of criminal proceeds in order to disguise their illegal origin. These AMLI policies aim to prevent such proceeds from being utilized in future criminal activities and from affecting legitimate economic activities.
The flight of corrupt capital impedes the growth of developing economies, and leads to an unjust distribution of income. Economic crimes, such as money laundering and corruption, are a threat to the development of new market economies and democratic principles and, because they are trans-national in nature, they are rightly dealt with by multilateral organizations like the IMF. The financing of terrorist activities, and related money laundering activities, threatens the peaceful co-existence of countries and people around the world. The events of September 11, 2001 clearly demonstrated this.

Why is the fight against money laundering so important ?

Linkage of money laundering with corruption
Role of offshore banking centers
Domestic and exported laundered money
Global Organization of Parliamentarians Against Corruption (GOPAC)

- GOPAC members have told us we must fight both corruption and money laundering simultaneously; Connected OECD/FATF
- Working with offshore banking centres (i.e. Switzerland, Bahamas, etc) to raise their level of cooperation to share info re: laundered funds.
- Not all money laundered offshore (message from African parliamentarians in Nairobi a few years ago).

Policy and Legislative Design

Must be tailored to specific needs of each jurisdiction
Financial intelligence is essential to detect and deter money laundering and terrorist financin
International standards set by Financial Action Task Force (F.A.T.F.)
F.A.T.F. sets AML standards
- 40 Recommendations on Money Laundering
- 9 Special Recommendations on Terrorist Financing

In Canada, the main legislation concerned with money laundering and terrorist financing is the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The objectives of the Act are –
- To facilitate the detection, investigation, and prosecution of money laundering and terrorist activities financing offences, and to deter money laundering and terrorist financing activities;
- To respond to the threat posed by organized crime while protecting personal information; and
- To assist in fulfilling Canada’s international commitments.
The anti-money laundering regime we have in Canada will not be suitable for all countries. The regime and its implementation must be custom made for each jurisdiction (different politics, political institutions, culture, state of maturity of financial institutions, citizen awareness and receptivity etc).
Importance of intelligence-based investigations so that scarce enforcement resource are utilized most efficiently.
FATF is the leader (sets standards) in the fight against money laundering.

Policy and Legislative Design

Regular mutual evaluation exercises assess compliance
Setting a big net
Privacy issues
Defining ‘suspicious transactions’
Solicitor/client privilege
Financial intermediaries

Review Mechanisms-
Auditor General’s Report 2004
Broaden the kinds of information FINTRAC may disclose to law enforcement
Improve accountability structures and coordination among initiative partners
Parliamentary Review 2005
Planned five-year review of PCMLTFA (Proceeds of Crime, Money Laundering and Terrorist Financing Act)
How to measure results and success? Major challenge!
Difficult to relate cause and effect.

Policy and Legislative Design

Monetary instruments
Onus – burden of proof re: seizures
Telegraphic transfers and internet banking
Domestic/offshore money laundering
Asset recovery

Monetary instruments include cash, telegraphic transfers, travellers' cheques, etc. Based on assumption that money laundered will ultimately end up in a financial intermediary.
- Challenges - What about?
Money service businesses and foreign exchange dealers are subject to the PCMLTFA, but compliance is difficult to monitor
- Sector unregulated
- Multitude of small businesses
- Some are underground
- No industry associations
Registration system to strengthen compliance monitoring

Organization structures

Financial Intelligence Unit (FIU)
Department/agency
Responsible Minister
Agency independence
Need for rules, regulations and guidelines especially for financial intermediaries

In Canada –
FINTRAC is an agency that is independent of law enforcement
FINTRAC is subject to policy oversight from the Minister of Finance (but not for day-to-day operations or decision-making).
There are other models (eg FIU part of law enforcement).
Huge volume of regulations and guidelines to put policies into effect.

Implementation

Political will
Adequate resources for competent agencies
The role of parliamentarians and parliamentary committees
GOPAC anti-money laundering initiatives
Inter-agency and international cooperation
Awareness training

Direction to attack money laundering must start ‘from the top’
Parliamentarians can play a vital role through their influence on legislation, by vigorous oversight of government activity through committee work (public accounts, finance, justice) and other means and support of parliamentary auditors, and perhaps most effectively through personal leadership. They can engage the public and help build the political will to act. However, to do so, they must understand how money laundering occurs and the mechanisms for its mitigation. They also need the support of recognized experts and a global voice. GOPAC provides the global voice and the proposed Anti-Money Laundering Initiative can help provide the understanding and expertise.
GOPAC: Most or all of you are familiar with GOPAC and many of you are actively involved with GOPAC so I won’t give you the GOPAC 101 spiel!
The Global Organization of Parliamentarians Against Corruption (GOPAC) – incorporated in Canada – was formed in October 2002 by over 150 parliamentarians from all continents meeting at a conference in the House of Commons in Ottawa, Canada. It is led by an international Board of Directors and Executive Committee, chaired by my Conservative colleague in the House of Commons, John Williams, MP for St Albert, Canada. Its Secretariat is located in the Parliamentary Centre in Ottawa, an NGO with over thirty years of experience in working with Canadian and international parliamentarians.
GOPAC has regional chapters in Africa, Latin America, the Russian Federation and the Newly Independent States (of the former USSR), as well as in many individual countries. Active chapter development is underway in the Asia-Pacific, Asia and Europe, the Arab world, as well as North America.
Parliamentarians at the 2002 GOPAC Conference identified five areas for particular attention. In addition to an anti-money laundering initiative, they recognized the need for monitoring parliamentary performance, training for parliamentarians on financial and budgetary oversight, a code of conduct for parliamentarians, and election financing. They also felt there was a need to update the Parliamentary Centre – World Bank Institute Anti-Corruption Handbook for Parliamentarians. The successful pursuit of these related initiatives will complement the Anti-Money Laundering Initiative.
we have developed a GOPAC AMLI proposal and presented it to the World Bank, IMF, UN, OECD and others - the objectives of which are:
a) to engage parliamentarians from around the world in the anti-money laundering (AML) agenda, by developing a better understanding of how money laundering occurs and launching an international initiative to combat it; and
b) to build political support to effectively implement practical mechanisms to combat money laundering.
This proposal is available to you on the GOPAC web site.
The ultimate result that we are seeking is extending the anti-money laundering regime beyond its current focus – principally in Europe and North America and to develop effective strategies that parliamentarians can execute (e.g. promotion of international treaties) to combat money laundering.
possible ‘end-games’- corruption and money laundering as ‘crimes against humanity’/international convention or treaty on money laundering. A draft anti-money laundering convention is available to you on the GOPAC web site
We are also looking at incremental measures that build international cooperation and awareness building (eg workshop in Nairobi, participation in NATO meeting in Kiev, seminar for Balkan MP`s in Vienna in 2005, workshop in Mexico City earlier this year (Senator Caesar Howreggi hosted), OSCE resolutions, this session, etc.).
My OSCE Resolutions on corruption & money laundering adopted in Washington, D.C.last year.
GOPAC has asked the FATF for observer status (correspondence on GOPAC`s web site)

Implementation

Financial resources
Risk management
Transparency & accountability
Financial sector -‘know your customer’
Reporting compliance by financial intermediaries

Resources (annual) to implement anti-money laundering regime in Canada-
Department Funding
FINTRAC 21.3
RCMP 4.9
Canada Border Services Agency 4.4
Canada Revenue Agency 2.2
Justice 1.2
Finance 0.3
Total $34 million

What is FINTRAC?

Canada’s Financial Intelligence Unit
- Collecting, analyzing and disclosing financial intelligence
Legislation
- Proceeds of Crime (Money Laundering) and Terrorist Financing Act
- Client ID, Record Keeping and Reporting
- Cross-Border Movement of Currency and Monetary Instruments
- Terrorist Listing

FINTRAC is Canada’s Financial Intelligence Unit, or FIU. FINTRAC’s mandate is to detect, prevent and deter money laundering and terrorist activity financing and threats to the security of Canada.
FINTRAC became operational in November 2001.
The Center, working at arms’ length, provides financial intelligence, information previously unavailable to law enforcement and national security partners.
The need for FIUs grew out of international efforts to promote strong domestic anti-money laundering regimes and effective international cooperation in the fight against money laundering and, more recently, terrorist financing.

Department	Funding
FINTRAC	21.3
RCMP	4.9
Canada Border Services Agency	4.4
Canada Revenue Agency	2.2
Justice	1.2
Finance	0.3
Total	$34 million

World Bank, GOPAC, APNAC and

Parliament of Tanzania

Financial Market Integrity: Anti-Money Laundering and

Combating the Financing of Terrorism Workshop Arusha, Tanzania

Wednesday, September 20, 2006

Notes for Hon. Roy Cullen, M.P. House of Commons, Canada

The Fight Against Money Laundering

Why is the fight against money laundering so important?

Size and scope of money laundering

Motivation for laundering money pre and post terrorists activities, drug money, corrupt money, tax evasion

Corruption and money laundering threats to international securityproceeds of crime

Why is the fight against money laundering so important ?

Linkage of money laundering with corruption

Role of offshore banking centersDomestic and exported laundered money

Global Organization of Parliamentarians Against Corruption (GOPAC)

Policy and Legislative Design

Must be tailored to specific needs of each jurisdiction

Financial intelligence is essential to detect and deter money laundering and terrorist financin

International standards set by Financial Action Task Force (F.A.T.F.)

F.A.T.F. sets AML standards

40 Recommendations on Money Laundering

9 Special Recommendations on Terrorist Financing

Policy and Legislative Design

Regular mutual evaluation exercises assess compliance

Setting a big net

Privacy issues

Defining ‘suspicious transactions’

Solicitor/client privilegeFinancial intermediaries

Policy and Legislative Design

Monetary instruments

Onus – burden of proof re: seizures

Telegraphic transfers and internet banking

Domestic/offshore money laundering

Asset recovery

Organization structures

Financial Intelligence Unit (FIU)

Department/agency

Responsible Minister

Agency independence

Need for rules, regulations and guidelines especially for financial intermediaries

Implementation

Political will

Adequate resources for competent agencies

The role of parliamentarians and parliamentary committees

GOPAC anti-money laundering initiatives

Inter-agency and international cooperation

Awareness training

Implementation

Financial resources

Risk management

Transparency & accountability

Financial sector -‘know your customer’

Reporting compliance by financial intermediaries

What is FINTRAC?

Canada’s Financial Intelligence Unit

Collecting, analyzing and disclosing financial intelligence

Legislation

Proceeds of Crime (Money Laundering) and Terrorist Financing Act

Client ID, Record Keeping and Reporting

Cross-Border Movement of Currency and Monetary Instruments

Terrorist Listing

The Fight Against
Money Laundering

Corruption and money laundering threats to international security
proceeds of crime

Role of offshore banking centers
Domestic and exported laundered money

Solicitor/client privilege
Financial intermediaries