A Fair Cop

A simple guide to money laundering, confiscation and corruption

A recent RUSI commentary by Helena Wood invited the Financial Action Task Force to promote innovation via its forthcoming Review of Asset Recovery. The article attracted positive comments on LinkedIn including an observation from Richard Gould (a former FATF Evaluator) that “The potential to use the methodology in the way recommended by Helena is, in my opinion, already there. The FATF plenary just needs to open its eyes to what can be done”.

I agree with both Helena and Richard and would like to draw the attention of the FATF to a specific example of how one important global region approached the issue about a decade ago. Between 2009 and 2012 in Europe the Council of the European Union’s Review of Financial Crime and Financial Investigations used a mutual evaluation model that recognised and promoted innovation and good practice. We explore this in Chapter 13 of ‘The War on Dirty Money’, but a summary is given below.

I took part in two of these evaluations of Financial Crime and Financial Investigation, which of course included the topic of Asset Recovery. I was part of the visiting EU delegation to Hungary and later received the EU delegation that visited the United Kingdom. The EU evaluation process was very similar to the FATF Mutual Evaluation Report (MER) process: a pre-visit questionnaire, a visiting delegation of nine experts, a draft Report followed by an agreed Final Report and a formal presentation (in Brussels). The reports are still publicly available for review and, in my opinion, given that policy change in this area can be very slow, it is quite likely that some of the recommendations are still relevant today.

The resulting Reports were very detailed, focusing on the operational effectiveness of law enforcement and criminal justice agencies and how they achieved their results. Not dissimilar to the part of the FATF MERs that look at ‘Operational Effectiveness’ but more in depth, reflecting the focus of the reviews and the fact that, with similar resources, the delegations were not distracted by looking at Technical Compliance to regulations.

In one important respect the Council of the EU Reports differed from the FATF MERs. It is this aspect which could be specifically examined by the FATF and its Regional FATF-Style Bodies to see if some or all of it could be introduced in the FATF process

At the end of the reports were two sections: “Recommendations to [name of Member State]” and “Recommendations to the European Union, its Member States, institutions and agencies”. This was the culmination of the Report. It was a very specific way to promote innovation and improvement in both directions. This way of concluding an evaluation was respectful to the Evaluated Member State and a way to celebrate the work involved. A common reaction of participating agencies to the publication of an Evaluation Report is to breathe a collective sigh of relief and go back to work. However, under the European Union methodology there was an opportunity, in Plenary Session with their peers, for a Member State’s officials to showcase their excellence in legislation, procedure or operational effectiveness. In summary, this was a positive, respectful and useful way to conclude the process. For example, the Report on the United Kingdom included a Recommendation to other Member States that: “UK legal measures, which have proved to be highly effective, such as civil recovery, cash forfeiture and POCA investigatory powers need to be thoroughly explained and discussed at EU level.” The Report went on to promote: “The role and powers of financial investigators as well as their training system need to be presented at EU level and taken into account when common EU standards or training projects are being developed. Measures to mainstream financial investigations, including incentive schemes and the “Payback” campaign, need to be presented as an option and discussed at EU level.”

The EU Reports gave specific insight to practitioners and policy-makers on international cooperation, highlighting the best elements of success. The process was engaging and rewarding, because it culminated in something tangible that contributed to international cooperation in a specific, meaningful and practical way. It served as a way to focus minds.

Richard Gould suggests that the current FATF process already has the potential to do this and I agree. This modest proposal aims to realise that potential by making the search for innovation explicit and formal. This formality would provide a way to present and promulgate innovation in a way that can be tested in other countries and revisited as necessary. It is particularly relevant to international cooperation, where innovation only works if everyone is on the same page.

This adjustment to the FATF MER process could be made at negligible expense and, over time, would enhance the practice of asset recovery around the globe.

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