Global Governance Framework: Avoiding Cracks

[Music] Alam alaykum uh ladies and gentlemen uh a very good uh afternoon my name mamed shaloh I'm the director of communication and strategic Partnerships at the executive office of anti-money laundering and counterterrorism financing I do also chair the AML CFT public private partnership Forum I am delighted that the executive office of anti-money laundering and counterterrorism financing is the theme sponsor for the inre risk 4.0 Forum which is held for the first time as the part of Abu Dhabi Finance week 2023 under the patronage of his highness she Khaled B Muhammad bin Z AL hayan Crown Prince of Abu Dhabi and chairman of the executive Council of Abu Dhabi I'm I'm equally delighted to have the privilege of uh being in a moderator for this I would say uh great great panel and speakers so let's start with no doubt that Financial crime is a global problem it cost us a lot it cost the global economy an estimate of $2.1 trillion us annually this is the same size as the GDB of major countries including some of the G7 countries and this numerous figure does not include corruption tax evasion and cyber crime it I cannot emphasize enough the significant harm that's caused by criminals from drug trafficking human trafficking and environmental and climate change related crimes so it's not only about our economy it's also about our society security stability it's about our future so what can be done to counter this more successfully our panelist today will examine the global governance structures and the fight against Financial crime and ask what can what is working effectively and what can be done more how we can work more closely on an international level to Foster transparency accountability and the culture of ethical conduct so without further Ado I would like to introduce our esteemed guests and even though they need no introduction let me start from Dr re shami who is a director of research and strategic analysis at the UAE Financial intelligence unit Dr re has over 10 years of professional experience in International Financial relations and financial crime prevention in her role in the FIU she produced different typology reports strategic review papers prior to the FIU she was the head of international head of tax information exchange of tax information at the UAE Ministry of Finance Dr re holds a PhD in combating the financing of terrorism from the University of Birmingham in UK next Shadi eluri who is a deputy division Chief Financial Integrity group within legal department at the international monetary fund sh sh's areas of expertise include anti-money laundering counter financing of terrorism anti-corruption crossb governance and Financial Integrity issues before joining the IMF in 2007 he worked with the financial intelligence unit sic of the Lebanese Central Bank bipon he hold he received his legal and finance education in Lebanon and France next to John kak I think start with that's other side uh just the different order so JN kak he is the global cation the chairman of the global colation to fight Financial crime globally as previously hold the global money laundering reporting officer at UBS and standard charted bank and two-time co-chair of the walsburg group he's an adviser and a number a number of financial institutions and rtech providers and engaged with NOS in different areas including wildlife and human trafficking last but not least David Lewis who is the managing director and Global head of AML advisory at croll and the fatf executive secretary from 2015 up until June January 20 2022 David did the AML policy for the UK government before going to lead the fatf and represented in the G7 and G20 he was voted as the financial crime fighter of the Year by the global colation to fight Financial crime and now he is a fellow at rusi Center for financial crime and securities studies in addition to his role so let me start with the first question is basically an open question to all panelists what has been the most significant development in 2023 when it comes to Global governance and why perhaps start with an international perspective for Shadi coming from the international monetary fund what do you see globally then we go to the other panelists sh to you please thanks a lot Muhammad and it's a pleasure to be here and thank you again for the executive office uh for the invitation for inviting the IMF uh to be here at this important event um on on your question on developments I think maybe I'll take a broader perspective on the last decade and what has been done by the financial action task force since we're talking about risk I think I think when when you think about risk you you could fragment it into three pillars you have every country uh we have 190 members country at the IMF is facing different risks uh in relation to money laundering and terrorism financing so when you look at the three pillars I think you have the threat that the country is facing you have the vulnerabilities of the AML CFT framework and usually if you have high threat your system is vulnerable or you don't have proper defenses it materialize into impact so I'll talk a little bit about those three pillars and what we have seen in the last decade where we are and the developments that are happening now uh in the International Community I think that in 2012 the fact of required countries do your exercise understand better your risks because when you understand better your risk you could face the financial crimes and fight them more effectively and a lot of national risk assessment have been produced in the last 10 years if you look at the body of all the country National risk assessment you could see that I think most countries got it right on the vulnerability side they understand uh whether their framework and money laundering and combating terrorism financing Frameworks are strong or vulner or not too strong and in which areas I think the Gap where we're at the IMF trying to fill now in partnership with all other International Regional organization is part of the global framework is can we get better at understanding the threats and can we get better at understanding the impact and I will say a little bit more on on those two areas for the threats I think when you think about it you could have U uh you have to understand better uh what are you facing at the country level and I think what what we have seen is often countries say okay we have widespread corruption or tax evasion organized crimes drug trafficking domestic they look more at domestic but I think they're missing the cross border element which is very common in money laundering operations then you have to look at the country is it like a country what's the business model how is it linked to the economy of the country um what are the main threats that are facing us on the cross border is it like a country where proceeds of crimes are originating and they are laundered in the jurisdiction or leave the jurisdiction is it the jurisdiction mostly used to for the funding to transit or is it an end destination and dig deeper into what threats you are facing I think one big threat that we are seeing now discussing AC cross including in this forum is the emerging threats from new technologies and so on they prevent opport they present opportunities but they also present threats so what we're pushing countries to do is being more granular more in depth analysis of what threats are you facing and then the next step is what I mentioned is that often they have understanding of the vulnerabilities I I think the fat of reports present a very good mapping of the vulnerabilities but they're not often acting on them fast enough and the third pillar which is the impact of those crimes and and here I think it's it's IL defined in a sense in the IMF we we adjusted our policy to say maybe the impact is have to be more granular the impact on the macro economy like uh what's the impact on the fiscal what's the impact on the monetary policy what's the impact on your financial sector and the stability soundness of the financial sector and the structure reform is it impacting your growth maybe you could see benefit of the dirty money on the economy in the short term but it will create Bubbles and busts and you know it reputation risk and medium term inequalities and many other factors so I think our new strategy at the fund and that's I think the challenge going back to your question that we will be looking at the next five years can we deepen our analysis on threats can we deepen our an analysis on vulnerabilities and impact and have a better way of assessing the risk so we would fight Financial crimes better and I think that will help Bridging the Gap between AML CFT practitioners and the policy makers in the country whether they are ministers of Finance deciding on the budget or Governors to say okay this is necessary because not only we're fighting crimes because it's affecting people but also it's affecting the economy and how it's affecting the economy but I'm happy to talk more about that thank you muham thank you thank I think that's give a good segue from that International perspective Global what's happening to maybe go take now to the domestic Dr re you are heading the I would say the function responsible for typologies what's happening uh the U has been going through a transformational changes I would say in the last two years but in 2023 to this question in terms of the governance what you have been seeing in I would say the most significant developments uh well I will start first with a brief like you no development in term of global governance overall it's about the rising power of private sector and third actors it's about moving again not only from technical compliance to Effectiveness but from Effectiveness to sustainability uh of implementation and compliance with International standards uh during the past two to three years we have learned many lessons starting from the importance of International Post International and National cooperation uh the UE has been showing uh considerable effort when it's come to uh collaboration with International counterpart uh at the global level or when it's come to domestic cooperation between or among uh National authorities uh to bring a criminal uh to Justice starting from understanding our own risk um of financial crime um uh also reporting suspicious transaction to empower investigation uh freezing unseizing assets of criminals uh as well as it's having um a strong law that enable or um enable Prosecuting criminals U another uh lesson that uh has been learned during the past period it's also the role of public private partnership um Global governance it's about the shift from hierarchy to um again best practices and soft laws and uh the concept of Regulation by uh networks or policy networks uh the idea of uh delegation the implementation and the compliance of uh global standard to private sector uh actors uh while govern uh government recognize themselves in a more decentered and um decentered horizontal let's say forms so the UAE again has been doing great work in this area whether through the subcommittee of bbp or the periodic Round Table conducted by the UA FIU uh with reporting entities or overall Outreach sessions by supervisory authorities um and that brings me to the idea again over the past few years we have seen uh the idea of the culture of compliance how it it's developed over time uh so now all practitioners almost in the field the will will recognize the concept of that non-compliance or the cost of non-compliance exceeds the cost uh of compliance uh and that's a huge development another um development that it's happening or the greatest one I think in my opinion is is actually understanding the um Financial crime risk at the national level and today the UAE in the process of completing uh its second uh National risk assessment which reflects a maturity of understanding um uh as well as the capability of identifying our own national uh risk associated with financial sector um just to touch a little bit quickly on the technology since this is one of the same not only in this event but of the week I think also on the fentech in general technology it's again when we talk about global governance technology uh is one of the core element of globalization that enable the spread of financial crime overall with its benefit still uh we identify different patterns of financial crime using technology f for example identify different typologies related for example to fraud including including including fraud scums or romance fraud or email compromises or fishing using new techniques such as deep fake uh we also linked how um technology relate or an new modern let's say or modern social platform relate to drug trafficking and the potential use of drug trafficking um uh of uh use sorry of um dark webs in drug trafficking uh supply chain gly uh and another area of course it's the abuse of virtual assets so too many happening exactly in terms of development so just to to sum up uh I think again about technology it might have empowered the criminal to um uh Implement their plans but also empowers us uh and our defense and medication measure to um overcome uh or deal and tackle the problem of financial crime in general so thank you thank you David to you and would like maybe to refer also here to your formal role as a a FF executive secretary so what you have seen the global governance scen changes since the implementation also the effectiveness methodology 2013 what does that led to different changes in in in the I would say Global area what would you say here thanks mam I'll keep it fairly brief I want John to speak um I I think we can't underestimate the impact of geopolitics and I think we've seen that in 2023 um on our Global efforts to fight Financial crime um you look at the EU impact and the growing impact of the EU they're launching a EU anti-money laundering Authority if you are on a fatf list you're automatically put on an EU list and that means that you have to do enhanced due diligence on countries you're doing business in if they're on that list that's that's geopolitics at work that's not what fat requires um and then you've got sanction and the impact of unilateral sanctions and how that's leading to a fragmentation of the global framework of fighting Financial crime and we're seeing the emergence of the global South and the enlargement of the bricks and all of this is in the context of um leaders around the world craw did a survey this year um where we asked leaders about how they their understanding of financial crime risks and they all see Financial crime risks increasing and getting more complicated and at the same time they're investing more and more in technology U and that brings about a whole new set of risk RS uh in in and of itself so that's the context I think we're seeing in 2023 in terms of um the fates role and Effectiveness and where we go next um we started from a very low base you know basically asking countries back in 2012 do you understand your risks um we now need to think about how globally do we understand risks not just at a national level um and what we use as the indicator for those risks because the fhf greylist for example is not was never intended to be an indicator of risk so I think the fatf needs to think about the effectiveness of the global system for tackling money laundering terrorist financing and not just continue to focus on National National efforts yeah thanks D I think the point of the national assessment is that many jurisdictions or regions now thinking of this cross jurisdictional risk assessments or geographical Regional risk assessments I think uh John uh the global colation is one of the most I would say prestigious Nos and engaging heavily with the International Community and also the private sector what you would have seen in terms of these developments and changes I know you have views also on some of the certain threats coming from fraud area and that you have shared so please to you thank you thank you Muhammad um the point of this uh session is avoiding cracks in global governance on important issues like Financial crime that assumes it's all joined up and that these fishes are opening up which is actually the reverse that's not true we have significant gaps in our ability to be able to combat Financial crime which is different to fighting money laundering and different to fighting terrorism finance and different for fighting proliferation Finance so we talk 95% of the time about the activities of fatf for good reason but fatf is not the financial action task force on fraud it is not the financial action task force on financial crime it is the financial action task force on the money side of the crime which is only a piece of it it was meant to get us home and hosed in relation to fighting criminals but it has not done so after 35 years even though there's been a lot of support for it from a portrait perspective obviously sanctions compliance is a huge issue this year terrorism finance will become an even big will become a big issue too fraud and scams is is enormous which I'll come on to U and and also virtual assets of course takes up a huge amount of time and energy because we're focused much more on the money than we are focused on the crime that's why it's taking up an inordinate amount of time time and space from a landscape perspective this fraud and scams issu is now the fastest growing crime in the world by far we're all affected by it all of the time there is no Global approach to fighting fraud there isn't one fatf is not looking at it even though it published a typology report on fraud and scams last week or two weeks ago the way to attack fraud and scams is by prevention once you've been scammed getting a money back is going to be very difficult indeed FF is interested in typologies for banks and others in relation to spotting and then following money it's too late so who is responsible in the world for preventing fraud and scams who is going to talk to the microsofts of the world the Googles of the world and the the the the Facebooks of the world who are professional fraud enablers in many cases not intentionally but inadvertently in relation to their services that they provide to scammers who will try and rip us all off who is doing that there isn't anybody right so Global governance is weak in relation to the fighting against Financial crime the fight against fraud the fight against corruption the fight against human trafficking the fight against all those pretty good offenses but not against the money but the money has not been effective enough to get us home we need to also think about the crime as well and bring all these agencies together and have a financial action task force on fraud Financial crime and money laundering thank you get some still time for followup questions maybe I would go back David but from your other hat you spoke the least so maybe start with you again then go uh I I will just quote what Dr re highlighted about the cost of compliance and also about the use of technology and we are in this venue talking about the I would say uh the fourth Industrial Revolution so how we can look at technology either as uh I would say an enabler to mitigate risks or the virtual assets everyone talking about as I would say a key threat to the financial system and the financial stability so how do you look at this you're working with different jurisdictions so how how you look at the role of technology so technology I think has the potential today to completely transform the effectiveness uh of our anti-financial crime measures um but it also presents a risk um and quite often what we're seeing particularly as firms look to cut back on on their costs for other reasons they're they're getting rid of people and they're looking to replace people with technology but they don't it's technology they don't understand or that they're not tuning properly um and if you're talking about artificial intellig Ence then it's learning of previous practice and if previous practice is wrong or not finding where the money laundering is then you're you're just optimizing stupid so I think there's huge potential for technology but you have to understand how to use it and the risks that it introduces as well as the potential benefits thank you uh shardi uh you spoke about the IMF approach uh what has been done in terms of the Outlook in the coming few years how do you look at this in terms of I would say your coverage of the region in particular that brings us I think the qu the question of what we do at the IMF I think overall we have three functions and one of them is the IMF is going to every single country every year to check the health of the economy of the macroeconomy and then the question is becoming more common and common that it's not only discussing you know the budget and the fiscal and the monetary policy and so on it's also discussing how Financial crimes are negatively impacting the economy so one thing we're increasing coverage is we're trying to understand the risk and context of every member and when we discuss with the Minister of Finance and the governor whether the economy is doing well or not we have to discuss also how and why why they have to reduce the tackle better the financial crimes because it has negative macroeconomic implications so I think more specifically for the region we're trying to understand better uh the different Dynamics you have in the region countries that are fragile or conflict affected States but you have also emerging and getting into advanced more emerging economies so the question can we understand better the Dynamics in the region and see how we could convince them to fight it more effectively and continue investing heavily into the effectiveness of the AML CFT Frameworks I think many countries are there but they're still huge gap across the region 22 countries the second one is when uh function of the IMF is when we have provide financing the country is already into financial crisis and they have to do uh often difficult reforms to get out of it and often when we see that they are lacking and they are in the crisis because they already already made mistakes in the process we include conditionality in dialogue with the authorities to make that reform happen and for the region will continue doing it to the extent they come to us for financing but I think the third function is the one that will keep us very busy is capacity development and helping the authorities meet raise raise capability of their authorities whether they are fius supervisors uh law enforcement how they work together how they could understand understand better the risk how they make the system more effective I think just to conclude on that we we have a like Workshop this week here in Abu Dhabi to discuss the r Rising risks of virtual assets and how supervisors could supervise them more effectively and and tackle the the risks but fully agree with David's point on also the opportunities of the of the technology that we are also using and leveraging at the IMF to understand better theis contexts uh and and what countries are facing but thanks about Muhammad thank you Shady perhaps go uh back to uh John before concluding with Dr re is is the role of the private sector this is also Dr re quoting here here now again the role of the private sector John you have spent a long time over three decades in the private sector how do you see the evolving role of the private sector in in this I would say uh journey to fight Financial crime yeah look we've we've we've come a long way 30 years ago I was a lawyer for a bank in London and law enforcement would send you a court order and you would respond to it absolutely to the legal ease so that if they were asking you for Muhammad charow and he wasn't the account holder but the beneficial owner you'd say you didn't have Muhammad shaloh that was 30 years ago now it's completely the opposite it's we want to we'll tell you if it's Muhammad shalow plus if we have his relatives plus if we have connections or other business interests when we started out this there was this big concern about the Integrity of the financial system which is still at the heart of what fadf is trying to achieve orbe it we've won that battle right Banks may not be perfect and the finance system may not be perfect it never will but it probably won't be more and have more Integrity than it's got now it's probably quite towards the the top end and the fact that cooperation is significant public private Partnerships that you lead here in the region are excellent it's obviously the first one in the region here but we've been working closely across the private sector the public sector for at least probably about a decade at least and I think we're at the the high point of that moving into to new ways of work including um uh using new forms of technology so I'm I'm I'm pretty happy with where we are Muhammed I'm just not happy we're getting enough out of it and and I don't think that we can necessarily assume that the private sector on its own even by doing more will be enough to get us where we want to get to I do think there's more of the private sector need to join in in different Spa spaces I've mentioned that fraud but I also think we will never be able to fight Financial crime successfully without also a successful determined public sector as well thank you John I think uh we have uh almost two minutes U so Dr re uh what are I would say uh some remarks you would like to do from UAE Financial intelligence unit uh what you are saying in terms of your vision and also U the different I would say projects you are working in the country so I would leave it to you I will highlight again maybe Muhammad if I may the the role of Technology again since this is the same uh today all youe authorities as well as the private sector uh realize the power of innovation and the role of technology and AI system and we are trying to adapt to all um uh systems that enable us to um identify criminal uh behavior and detect their uh hidden connection uh so technology is a key and uh if I may conclude with one frequent quote used in the L literature of financial crimes that criminals are always ahead of us I think we need not to start actually we are late somehow but we need to actually change our perception and this equation and Technology definitely is a key to whether against fraud or any other type of financial crime today it's something that a must you uh a must to do or must have whether in public or private sector so yeah can't can't disagree well uh thanks I think that maybe the in in 30 seconds that's left I can just maybe conclude the three key key takeaway points is that first is our response to fraud as the fastest growing predicate crime that we need more cordinated approach to tackle fraud risks the second which is also related to fraud is not anymore just conventional fraud but electronic digital fraud so threats emerging threats raised from cyber related threats this is something we need to look at digital ID and digital frent ID and so on so forth and the third is the public private partnership is that something not only about sharing intelligence because that the perception usually is that the public will just get intelligence it's it's really about trust engaging with the private sector to get them more into the policy development process because they know in terms of the day-to-day business I think that's a fantastic discussion we could spend double of this time talking about this but with respect also to the other sessions please do uh join me in greting the panelist thank you very [Applause] much