Combating Money laundering (ML) Part 2

In Part 1, we briefly touched upon different organizations working towards combating money laundering. This article will be a continuation of Part 1 where we will discuss other organizations and government bodies doing the same.


United Nations: Vienna Convention – It was issued in 1984 and officially known as “the convention against illicit traffic in narcotic drugs and psychotropic substances”. This treaty recognized the links between drug trafficking and related organized criminal activities and goals for the Signatory Parties to establish drug trafficking as a crime and including the conversion of drug trafficking proceeds into other property. One major shortcoming was that it was only restricted to drug trafficking.

United Nations: Palmero Convention – It was issued in 2000 and known as the “convention against transnational organized crime”. It focussed on organized crime and is designed to promote cooperation to prevent and combat transnational organized crime more effectively. The treaty also called for measures to detect, monitor the movement of cash and negotiable instruments against borders, and to promote cooperation at all levels among all regulatory authorities to combat money laundering. It called for the identification, tracing, freezing, seizure, and eventual confiscation of the proceeds of crimes referred to by the convention.

International Monetary Fund (IMF) and World Bank (WB): The primary purpose of the International Monetary Fund is to ensure the stability of the international monetary system (the system of exchange rates and international payments that enables countries and their citizens to transact with each other). The World Bank It’s a vital source of financial and technical assistance to developing countries around the world. It is not a bank in the ordinary sense but a unique partnership to reduce poverty and support development. World Bank comprises five institutions managed by their member countries. Since 2001, IMF and WB have required countries that receive aid or assistance from these to implement AML programs. On April 26, 2001, IMF and WB issued a joint paper entitled, “Enhancing contributions to combating money laundering”. In this letter, the five recommended steps were given.

  1. Publicizing the need to put in place the necessary economic, financial, and legal systems designed to protect against money laundering.
  2. Recognizing 40 FATF as standard for AML.
  3. Intensifying to focus on AML issues when performing financial sector assessments.
  4. Working more closely with the major international AML groups.
  5. Increasing the provision of technical assistance by the International Monetary Fund and World Bank in the area of AML.

Wolfsberg Group: It is an association of global banks that came to develop financial services industry standards, and related products for KYC, AML, CFT policies. In the years it has issued many papers on ML.

Wolfsberg Group: Private Banking – First publication was issued in 2000 entitled “ Global AML guidelines for Private Banking”. It was revised and renamed in 2002 as “ Wolfsburg AML principles on Private Banking”. It suggested that reasonable steps should be taken to establish the identity of clients and beneficial owners. Establishing the purpose of a private banking account and its anticipated account activity. It also suggested that the source of wealth and funds and net worth of the customers should be determined.

Wolfsberg Group: Correspondent Banking – It highlighted the prohibition of the use of concentration of counts or internal bank accounts for the benefit of individual clients. In 2002, Wolfsberg issued, “Wolfsberg AML Principles for Correspondent Banking”. It recommended that a senior, independent official of the bank to approve the correspondent banking relationships and a risk-based due diligence approach to establish and maintain correspondent banking and relationships.

Wolfsberg Group: Monitoring – In 2003, a paper was issued on monitoring, screening, and searching. It discussed the need for monitoring transactions and customers to identify unusual or suspicious activity and to report them to the appropriate authorities.

Wolfsberg Group: Managing ML risks – In 2006 a statement was issued entitled, “Guidance on a risk-based approach for managing ML risk”. This paper addressed the need for a reasonably designed risk-based approach that will provide a framework for identifying the degree of potential ML risk associated with customers and transactions and allow an institute to focus on those customers and transactions that potentially pose the greatest risk of ML.

Basel Committee: This committee's decisions have no legal force. It formulates supervisory standards and guidelines and encourages convergence towards common standards and monitors their implementation. 1998, it issued a paper entitled, “ The Prevention of criminal use of the banking system for the purpose of ML”. The paper was designed to focus on the fact that banks need to look not just at the safety and soundness issues but also to concentrate on the risk of ML and the need to be alert to the importance of combating money laundering. It encouraged bank management to ensure that all persons conducting business with the banks are properly identified, illegitimate transactions are discouraged, and cooperation with law-enforcement agencies is achieved.

Basel Committee: Core Principles of effective banking supervision – In 1997, the Basel Committee issued a paper called “core principles of Effective banking supervision”. This paper focussed on potential issues in general but also addressed money laundering. It discusses the importance of KYC rules. This paper called on bank supervisors to ensure that the bank reports suspicious activities and engage in EDD with regard to correspondent bank accounts. Also suggested that banks should have sufficient controls and systems for preventing getting abused by money launderers.

Basel Committee: CDD for banks – This committee set the following for essential elements of KYC standards.

1. Customer acceptance policy

2. Customer identification

3. Ongoing monitoring of high-risk accounts

4. Risk Management

Egmont Group: It was created in June 1995 by a group of government agencies and international organizations. It discussed ways to fight the problem of money laundering. It is an international group of Financial Intelligence Units. This group came up with the recommendation of setting up FIU in each country to receive financial disclosures to share financial information across borders. It was issued in 1996 and amended in 2004, it is a central, national agency responsible for receiving, analyzing, and disseminating competent authorities, disclosures of financial information.

This concludes the information about the different governmental organizations working towards combating money laundering. My next article will touch upon different AML programs undertaken by financial and non-financial institutions. Stay tuned.

This was the last post for 2020, Wish you all a very happy and prosperous New Year.



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