Maybe Marx was right

No, not that Marx – I’m talking about Groucho.  And specifically what he said about clubs: “I don’t care to belong to any club that will have me as a member”.  The club I have in mind today is the FATF – and its recent announcement that unless Turkey gets its act together and passes legislation criminalising terrorist financing (it’s done ML but not TF) by 22 February 2013, it will be drummed out of the club.  This isn’t out of the blue, of course – Turkey has had warnings stretching back over two years – but it seems that the FATF has reached the end of its patience.  The question is: what is membership of the FATF worth?

In many jurisdictions, FATF membership is used as a shorthand for “low-ish risk” – although several of those jurisdictions (including the UK) do then temper that by saying that certain FATF members should not be considered low risk.  (As explained in Part III of the JMLSG Guidance Notes, the UK excludes Argentina, China, New Zealand and Turkey.)  But in general, FATF membership is seen as a Good Thing.  The wise MLRO, however, will keep a watching brief on the lists issued periodically by the FATF of jurisdictions which, although still members of the FATF, have AML/CFT regimes that are less than satisfactory – the very lists that have brought Turkey to the brink of banishment.

And what if Turkey holds its nerve and does not accede to the demands of the FATF?  What will be its fate on 23 February 2013?  Well, there will be damaging headlines around the world, that’s for sure, and much tutting in the AML community.  But practically, well, I think it depends on individual jurisdictions.  Some may pass sanctioning legislation against Turkey and its citizens, requiring super-enhanced due diligence, or reporting of all activity, or even cessation of business.  Some may put out warnings via supervisory agencies and regulators.   And some may do nothing, trusting to their regulated sector to draw its own conclusions.  Personally, I don’t think it will come to this, as I imagine that Turkey will come to its senses and realise that it really does not need all of this aggro.  But if it does say yah-boo sucks to the FATF, I will watch with academic interest; I may be wrong (and if so, please someone correct me) but I don’t think the FATF has ever cancelled a membership before.  Either way, it’s a date for the new diary.