Turning off the Tap for Money Laundering and Terrorism
- Project Name: Anti-Money Laundering/Countering the Financing of Terrorism
- Region/Country: Regional/All Developing Member Countries
- Sector and Themes: Finance
- Year: 2018–Present
- Project Leaders: Steven Beck
The trade and finance scorecard is the start of a process of engagement on this difficult subject.
Efforts to stop financial crime can unintentionally lead to legitimate SMEs, including those in emerging markets, being unable to find the support they need to grow, create jobs, and contribute to development. The Trade Finance Gaps, Growth, and Jobs Survey published in 2019 by ADB’s TSCFP identified unintended consequences of anti-money laundering regulatory compliance as a major impediment to closing the $1.5 trillion trade finance gap particularly among SMEs.
ADB’s TSCFP developed knowledge initiatives to address the problem: a market-based solution that improves reporting requirements that could help thwart crime; online training and certification for professionals in anti-money laundering and counter-financing of terrorism (AML/CFT); a Trade Finance Scorecard; and a webinar series in the Pacific on best practices. With banks, regulators, and international organizations, TSCFP created a plan to improve detection, investigation, and prosecution of trade-based money laundering and to reduce unintended adverse consequences on access to trade financing due to compliance requirements. This led to the creation of data elements for suspicious activities reports provided by banks to regulators and use of a feedback loop to determine which elements from those reports are useful. TSCFP, in partnership with goAML—a fully integrated reporting system developed by the United Nations Office on Drugs and Crime used in about 50 jurisdictions—is implementing these data elements.
TSCFP is providing online training and certification to banks in partnership with the Association of Certified Anti-Money Laundering Specialists. About 700 bankers in developing member countries have taken part in three levels of AML courses. In December 2020 TSCFP hosted a Pacific AML/CFT Webinar series with about 2,000 participants in its 5-day discussion and knowledge sharing on existing and emerging financial crime issues in the Pacific. The Trade Finance Scorecard identifies seven systemic elements of effective regulation that could be strengthened to mitigate the risk and unintended consequences of AML/CFT regulations. The scorecard assesses five transaction issues stemming from the interpretation, implementation, and compliance of AML/CFT regulations.
Knowledge products and services delivered
TSCFP identified trade-relevant data points to be added to existing suspicious activities report templates. The feedback mechanism between regulators and banks helped determine if data elements from suspicious activity reports can be used effectively to handle financial crimes. TSCFP also trained and certified bank professionals in AML/CFT issues and developed the Trade Finance Scorecard.
Impact and results
ADB’s initiatives around trade-based money laundering data points and feedback mechanisms were cited as best practice in the December 2020 Financial Action Task Force-Egmont Group trade-based money laundering report. ADB gathered support from the financial intelligence units in seven countries—Bangladesh, Indonesia, Mongolia, Nepal, New Zealand, Pakistan, and Sri Lanka—to bring the discussion to the International Users Group of the United Nations Office on Drugs and Crime’s goAML system.
Lessons for Replication
The project demonstrates the need to attack problems from different fronts and involve market participants, regulators, and ADB to enact change. It shows that knowledge products and market testing can become a feedback loop for improvements.