IMF proposes risk-based money laundering assessments

Reuters News
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Posted: Jun 27, 2011 3:54 PM
IMF proposes risk-based money laundering assessments

WASHINGTON (Reuters) - The International Monetary Fund said on Monday it was weighing a shift in the way it assesses countries' efforts to combat money laundering and terrorist financing to focus on areas of the greatest risks.

An IMF staff report proposed the change in order to tailor a country's assessment to its individual circumstances, rather than stick with the current one-size-fits-all approach.

Jody Myers, the IMF's assistant general counsel, told Reuters the new approach aimed to be more effective than the Fund's current exhaustive and complicated approach.

The staff report showed that member countries' scores on the compliance assessments have been stubbornly low, despite an average cost of $310,000 per assessment.

For countries that have been through the full assessment, where a baseline of compliance has been established, the Fund in the future would apply a "lighter touch" review that would focus on areas of greatest risk, Myers said.

"We think it's something that can result in a more effective engagement with our member states," he added.

"If we're in a country that doesn't have a securities market, but that does have an extractive industry in precious metals, we cannot waste our time trying to assess against a securities market that isn't there or is not significant," Myers said. "But we can do a deeper dive on a precious metals industry that in, say, the U.S., would not be a major issue."

This approach is more line with how a number of other international and regional bodies conduct such assessments, Myers added.

The Fund's board authorized that the proposal be discussed with other bodies that do assessments of anti-money-laundering and terrorist finance efforts to ensure it would be viable. This includes the Financial Action Task Force, a group of countries that sets standards for compliance in this area.

The IMF estimates that in the United States alone, profits from crimes involving money laundering total around $275 billion, excluding tax evasion. Allowing it to go unchecked can undermine market stability, deprive governments of needed revenues and aid terrorism, it said.

(Reporting by David Lawder; Editing by Dan Grebler)