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.

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2 Responses to Maybe Marx was right

  1. Graham Thomas says:

    Hi Susan

    Interesting thoughts as ever. FATF is a perfect example of a club where, once membership has been gained, you’re in for good …. which seems to be an odd philosophy when you looking to encourage the highest standards of behaviour.

    Another example which comes to mind is the House of Lords. According to the all powerful Wikipedia, the House of Lords doesn’t have a procedure for sanctioning wayward lords and there have only been two suspensions since 1642.
    ……. http://en.wikipedia.org/wiki/House_of_Lords#Disciplinary_powers

    Oh well, we might aspire for a perfect world but it would be far less interesting to live in !!

    Best wishes

    Graham

  2. Hi Graham

    Your comparison with the House of Lords is an interesting (and timely) one – and if we’re going for the same rate of expulsion (one every 185 years), I reckon Turkey will be safe!

    Best wishes from Susan

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