On December 7 and 10, 2018, the Financial Action Task Force (“FATF”) released two reports evaluating the United Kingdom’s (“UK”) and Israel’s anti-money laundering (“AML”) and counter-terror financing (“CTF”) programs and welcomed Israel as the 38th member of the task force. The FATF is an inter-governmental policymaking body dedicated to creating AML standards and promoting effective measures to combat money laundering (“ML”) and terrorist financing (“TF”). When releasing both reports, the FATF described the UK and Israel as key leaders and innovators in the fight against ML/TF and provided several recommendations on how both programs can be strengthened.
Because both reports total over 250 pages, this blog post focuses on only the key findings in each report. The FATF Evaluation of the United Kingdom (the “UK Report”) concluded that, although the UK has effective and robust AML policies addressing both current and future threats, it needs to improve its AML oversight by increasing the resources dedicated to its financial intelligence unit. Meanwhile, the Joint FATF/MONEYVAL Evaluation of Israel (the “Israel Report”) praised the country’s effective use of financial intelligence but found that Israel needs to strengthen its preventative measures to address future ML/TF risks.
The UK Report documented the findings of the FATF’s on-site visit during March 2018. The report emphasized the fact that, due to the UK’s position as a major global financial center and the world’s largest center for cross-border banking, its top ML vulnerabilities include high-end ML, cash-based ML, and ML stemming from (1) fraud and tax crimes, (2) drug crimes, (3) human trafficking, and (4) organized crime, including transnationally.
As a whole, the report praised the UK’s AML/CTF regime and the “significant improvements” that the UK has made since its last FATF evaluation in 2007. Notably, however, the FATF urged the UK to improve its AML/CTF oversight by increasing the resources available to its Financial Intelligence Unit (“UKFIU”).
In particular, the UK Report identified the following key successes:
Despite the UK’s program achievements, the FATF urged the UK to strengthen its AML/CTF program in important areas:
Similar to the UK Report, the Israel Report analyzed the findings of the FATF’s on-site visit during March 2018. The report identified Israel’s top ML risks as relating to fraud, tax offenses, and organized crime. The FATF explained that, due to Israel’s geographic location, it also faces significant TF threats from its surrounding neighbors.
In granting Israel membership to the organization, the FATF concluded that Israel has “demonstrated a commitment to protect the integrity of the financial system” and developed a robust AML/CTF program that “is achieving good results in identifying and responding to the risks the country is facing.” In contrast to the UK Report, the Israel Report specifically praised Israel’s effective use of financial intelligence. However, the FATF also underscored Israel’s need to understand future ML/TF risks and to implement preventative, risk-based measures to address them now.
Specifically, the Israel Report identified the following program achievements:
Notably, the FATF also urged Israel to make key improvements to its AML/CFT program: