De‐listing from NCCTs and money laundering control measures: a banking regulation perspective
| Published date | 01 October 2005 |
| Date | 01 October 2005 |
| DOI | https://doi.org/10.1108/13685200510620867 |
| Pages | 320-327 |
| Author | Wassim N. Shahin |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control Ð Vol. 8 No. 4
De-listing from NCCTs and Money
Laundering Control Measures:
A Banking Regulation Perspective
Wassim N. Shahin
INTRODUCTION
The purpose of this paper is to use a banking regulation
perspective to address the general experience of
countries that were initially listed under the heading
of non-cooperative countries and territories
(NCCTs). This group of countries did not meet
some or most of the 25 criteria developed by the
Financial Action Task Force (FATF) on money laun-
dering based on the 40 Recommendations (later on 48)
setting out the basic framework for anti-money laun-
dering eorts. Several of the developed criteria relate
to banks and ®nancial institutions. Therefore, the
paper highlights the 25 criteria, shows the ones
missed by each of the 23 countries listed as NCCTs,
analyses how de-listed countries successfully addressed
these criteria through further bank regulation, and
concludes with a detailed application to the path
taken by one of these countries, Lebanon. The analysis
could lay out the groundwork for future research ana-
lysing the possible impact of the regulation on speci®c
banking industries in each of the countries in terms of
bank secrecy, deposit ¯ows, interest rates and other
banking variables.
1
The paper is organised with this
introduction and ®ve additional sections. The second
section brie¯y addresses the 48 Recommendations
and the ensuing 25 criteria. The third section high-
lights and explains the listing, de-listing and monitor-
ing process for the 23 initially listed countries. The
fourth section is a mapping of countries against criteria
to determine the ones missed by every country. Then,
the criteria related to banking are isolated to determine
the impact of meeting these on the future regulation of
banks. The ®fth section discusses a representative case
of Lebanon by showing how through some further
regulation of banking and secrecy conditions, the
country was able to be de-listed from NCCTs and
later on moved out of the monitoring list. The last sec-
tion contains concluding remarks.
FATF ANTI-MONEY LAUNDERING
FRAMEWORK
The FATF originally drew up its 40 Recommen-
dations aimed at ®ghting money laundering in 1990
and revised them in 1996 based on the experience
gained over six years. These recommendations cover
the criminal justice system and law enforcement, the
®nancial system and its regulation, and the strengthen-
ing of international cooperation.
2
In October 2001, in
light of the events of 11th September, eight special rec-
ommendations to combat terrorist ®nancing were
added.
3
The FATF believed that these additional rec-
ommendations combined with the initial 40 would set
out the framework to detect, prevent and suppress the
®nancing of terrorism and terrorists acts.
In this context, on 14th February, 2000, the FATF
published an initial report on NCCTs developing 25
criteria identifying detrimental rules and practices
that hinder and impede international cooperation in
the ®ght against money laundering.
4
The criteria are
based on and consistent with the recommendations.
The report describes a process where countries
having such rules and practices can be identi®ed and
encourages them to implement standards de®ned in
the criteria to protect their economies against the pro-
ceeds of crime. The 25 criteria are broadly grouped
under four major headings. The ®rst addresses loop-
holes in ®nancial regulations and contains 11 criteria
related to the regulation and supervision of ®nancial
institutions, the rules for the licensing and creation
of these institutions, the customer identi®cation
requirements, the excessive secrecy provisions, and
the suspicious transactions reporting system. The
second heading covers criteria 12± 14 and deals with
obstacles raised by other regulatory requirements in
the form of inadequate commercial law requirements
for registration of business and legal entities and lack of
identi®cation of the bene®cial owner of these entities.
The third, covering criteria 15± 22, deals with
obstacles to international cooperation by administra-
tive and judicial authorities. The last heading encom-
passes three criteria dealing with inadequate resources
Page 320
Journalof Money Laundering Control
Vol.8, No. 4, 2005, pp. 320± 327
#HenryStewart Publications
ISSN1368-5201
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