APG History and Background
The Asia/Pacific Group on Money Laundering (APG) is an autonomous and collaborative international organisation founded in 1997 in Bangkok, Thailand consisting of 41 members and a number of international and regional observers. Some of the key international organisations who participate with, and support, the efforts of the APG in the region include the Financial Action Task Force, International Monetary Fund, World Bank, OECD, United Nations Office on Drugs and Crime, Asian Development Bank and the Egmont Group of Financial Intelligence Units.
APG members and observers are committed to the effective implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism, in particular the Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF).
The APG has five primary functions:
- Mutual evaluations: assess compliance by APG members with the global AML/CFT standards through a mutual evaluation (peer review) programme;
- Technical assistance and training: coordinate bi-lateral and donor-agency technical assistance and training in the Asia/Pacific region in order to improve compliance by APG members with the global AML/CFT standards;
- Typologies research: conduct research and analysis into money laundering and terrorist financing methods to better inform APG members and the general public of trends, methods, risks and vulnerabilities of the financial and non-financial sectors to these crimes;
- Global policy development: participate in, and contribute to, policy development of the international AML/CFT standards by active participation in the global network of FSRBs; and
- Private sector engagement: provide information to the private sector to better inform them of international developments in AML/CFT and provide a forum for them to engage with the APG.
The APG also assists its members to establish national coordination mechanisms to better utilise resources to combat money laundering and terrorist financing.
The APG’s purpose, mission and goals are further described in the core strategic and business planning documents of the APG:
- Terms of Reference;
- Strategic Plan; and
- Annual Business Plan.
This section briefly discusses the nature of money laundering and outlines the history of the APG and its relationship with the FATF.
Defining Money Laundering: Scope and Nature of Problem
Although estimating the amount of worldwide money laundering is problematic, the International Monetary Fund has estimated that between 2% and 5% of global GDP per year is generated annually as the proceeds of crime (in US funds that is an amount in the trillions of dollars), the largest sources of which are illicit drug manufacturing and trafficking, arms and people smuggling, corruption, fraud, extortion, kidnapping and theft. Once those funds are dealt with in accordance with the definition below (whether entered into the financial system or concealed, disguised or otherwise transferred etc.) they are by definition laundered funds.
Money laundering globally now presents not only a problem for criminal justice systems but also a macro-economic problem because (given the sheer volume of monies involved) it has the capacity to destabilise financial institutions and financial systems. Many jurisdictions and regions in the Asia-Pacific involve central banks, finance and justice departments and law enforcement agencies in their national strategies to combat money laundering.
"Money laundering" is not a legal term in international law but is used to loosely describe the "turning of dirty money into clean money". The act by which illicit funds are made to appear legitimate (which the term refers to) is defined in key international instruments, most notably the UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and the UN Convention Against Transnational Organized Crime. The latter defines money laundering as:
The conversion or transfer of property, knowing that such property is the proceeds of crime, for the purpose of concealing or disguising the illicit origin of the property or of helping any person who is involved in the commission of the predicate offence to evade the legal consequences of his or her action; or the concealment or disguise of the true nature, source, location, disposition, movement or ownership of or rights with respect to property, knowing that such property is the proceeds of crime. (Article 6, UN Convention Against Transnational Organized Crime).
The act of conversion and concealment is crucial to the laundering process. But it is important to note that "laundered funds" never become legitimate. They only ever have the appearance of legitimacy, not the reality, even though the so-called money trail may be complicated and obscure the original criminal source of the funds. This is important because in jurisdictions where there is a criminal asset confiscation scheme (proceeds of crime legislation), legitimate looking laundered funds may still be forfeited to the State as criminal proceeds.
National strategies to combat money laundering must take into account the global nature of the problem and therefore include not only effective criminal laws prohibiting money laundering and persuasive penalties for those convicted, but also efficient and effective confiscation or forfeiture mechanisms as well as effective laws to permit international cooperation around information sharing, extradition and mutual legal assistance.
Establishment of the APG and its Secretariat
In conjunction with the Commonwealth Secretariat, the FATF began 'awareness raising' in the Asia/Pacific region in the 1990's as part of its global strategy. A number of symposia were held: the first in Singapore in April 1993. A second symposium was held in Kuala Lumpur, Malaysia in November/December 1994, at which time 16 Asia-Pacific jurisdictions and regions endorsed and agreed to implement the FATF's 40 Recommendations.
In order to achieve more concrete results, a regional Secretariat named, the "FATF Asia Secretariat", was established in 1995, funded by Australia. In co-operation with other international bodies, the FATF Asia Secretariat continued to work to consolidate support for anti-money laundering measures. Its primary objective was to obtain wide regional commitment to implement anti-money laundering policies and initiatives and secure agreement to establish a more permanent regional anti-money laundering body.
Typologies Workshops were held in Hong Kong, China in October 1995 and November 1996, and the Third Asia Money Laundering Symposium was held in Tokyo, Japan in December 1995. At the Fourth (and last) Asia/Pacific Money Laundering Symposium (in Bangkok, Thailand) in February 1997, the APG was officially established as an autonomous regional anti-money laundering body by unanimous agreement.
A Secretariat was also established to serve as the focal point for APG activities. It is located in Sydney, Australia and its funding, as well as funding for all APG activities, is provided by all APG members in accordance with a specific funding formula based upon the individual GDP for each member.
Financial Action Task Force (FATF)
The first co-operative and global policy response to the threats posed by money laundering was by the G7 group of countries who established the FATF in 1989. Since 1989, the FATF has produced a comprehensive set of international standards against money laundering and terrorist financing (AML/CFT).
The core documents of the FATF include:
- The 2012 FATF 40 recommendations on money laundering , terrorist financing and proliferation financing (“the standards”), with interpretative notes;
- 2013 methodology for assessing compliance with the standards; and
- Best Practice Guidelines.
The International AML/CFT Standards
The 2012 FATF standards contain certain core, or essential, recommendations including the requirement on countries to:
- Criminalise money laundering, terrorist financing and proliferation financing in accordance with international law, including the new requirement to add direct and indirect tax crimes as predicate offences to money laundering;
- Freeze terrorist assets and confiscate the proceeds of crime;
- Establish a financial intelligence unit to collect, analyse, evaluate and disseminate suspicious transaction reports from financial institutions and other reporting entities;
- Supervise those financial institutions and other reporting entities to ensure compliance with customer due diligence and other requirements contained in the standards;
- Ensure that comprehensive and effective mechanisms are in place to cooperate effectively on the international level given the growing international dimension to these crimes.
- Identify, assess and understand (usually through a national risk assessment) their own money laundering and terrorist financing risks;
- Implement measures relating to proliferation financing and domestic (not just international) politically exposed persons
These standards have been accepted internationally as the global benchmark for anti-money laundering, anti-terrorist financing and anti-proliferation financing measures by the United Nations, International Monetary Fund, World Bank, Asian Development Bank and many other international organisations and bodies.
Effectiveness – 11 Immediate Outcomes
A key component of the 2013 assessment methodology relates to what are referred to as “11 Immediate Outcomes.” These outcomes are the benchmark against which a country is judged to have effectively implemented the FATF technical standards.
Effectiveness is the extent to which financial systems and economies mitigate the risks and threats of money laundering, and financing of terrorism and proliferation. This could be in relation to the intended result of a given (a) policy, law, or enforceable means; (b) programme of law enforcement, supervision, or intelligence activity; or (c) implementation of a specific set of measures to mitigate the money laundering and financing of terrorism risks, and combat the financing of proliferation.
The goal of an assessment of effectiveness is to provide an appreciation of the whole of the country’s AML/CFT system and how well it works. Assessing effectiveness is based on a fundamentally different approach to assessing technical compliance with the FATF standards. It does not involve checking whether specific requirements are met, or that all elements of a given FATF recommendation are in place. Instead, it requires a judgement as to whether, or to what extent defined outcomes are being achieved, i.e. whether the key objectives of an AML/CFT system, in line with the FATF standards, are being effectively met in practice.