This report provides good practices for the design and implementation of effective capacity development programs on anti-money laundering and countering the financing of terrorism (AML/CFT). It first reflects on the current AML/CFT landscape, including recent changes to AML/CFT evaluation methodologies, diverging responses to money laundering and terrorist financing, unintended consequences of AML/CFT measures, and the integration of financial inclusion objectives into AML/CFT efforts. Against this background, the report outlines good practices for the development of regional and national AML/CFT capacity development programs. It explores each stage of the program cycle: inception and design, implementation, and monitoring and evaluation. The report concludes with reflections on how technical assistance providers can help reconcile international standards, existing policies, and practical implementation contexts.
“De-risking” refers to financial institutions closing the accounts of clients perceived as high risk for money laundering or terrorist financing abuse, namely money service businesses, nonprofit organizations, correspondent banks, and foreign embassies.
This report explores the links between bank de-risking and the ascendance of anti-money laundering and countering the financing of terrorism policy. It presents a nuanced overview of the driving factors and influences behind de-risking and its potential impact on financial inclusion, particularly for vulnerable communities. The report includes case studies highlighting innovative approaches to, and lessons learned from, addressing financial access challenges across six different sectors. It concludes with recommendations to better address de-risking challenges for banks, regulators, and bank clients experienced in or at risk of account closures.
Money laundering and terrorism financing pose significant threats to security and development efforts worldwide and increasingly undermine the integrity and stability of the global financial system. In recent years, there has been increasing political will and tangible progress on anti–money laundering and countering the financing of terrorism (AML/CFT) issues in the region. In order to capitalize on this momentum, the Global Center, supported by the Government of Denmark, has produced a detailed research study of AML/CFT developments and remaining challenges in the region, building on a 2012 also supported by the Government of Denmark, titled “ISSP-CGCC Joint Baseline Study on Anti-Money Laundering and Countering the Financing of Terrorism in the IGAD Subregion.”
The report includes cutting-edge information and analysis from 10 countries: Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan, Tanzania, Uganda, and Yemen. It provides a snapshot of the underlying economic and socio-political climate in each country, followed by an in-depth analysis of AML/CFT developments and achievements, as well as remaining capacity and implementation challenges. The report includes recommendations for initiatives that support jurisdictions in addressing capacity challenges and building more robust AML/CFT regimes and discusses regulatory challenges and financial inclusion opportunities posed by emerging technologies, such as mobile banking, within the region.
Remittance funds sent by the diaspora are often noted as a lifeline for Somalia, comprising a significant component of the economy and covering the costs of basic necessities such as food, education, and health care for millions of Somalis. Beyond providing vital support for short-term sustenance needs, many members of the Somali diaspora view sending remittances as a cultural tradition and a personal contribution to the rebuilding of their communities, including investment in the growth of business enterprises, financial stability, and economic development across Somalia.
This policy brief examines the Danish-Somali remittance corridor against the backdrop of recent MSB bank account closures, including those in the United Kingdom and the United States. It provides insight into MSB operations and remittance sending practices in Denmark, as well as background on the Somali diaspora there. The brief was informed by a combination of desk research and field consultations with Somali community members in the Danish cities of Aalborg, Aarhus, and Copenhagen. The brief offers recommendations to key actors including Danish AML/CFT regulatory authorities, Somali MSBs, and Danish financial institutions holding Somali MSB bank accounts, with the objective of preventing similar account closures in Denmark.
The development of a vibrant and active private banking system that complements existing public sector work is considered important to Ethiopia’s economic progress and key to the success of the government’s “Growth and Transformation Plan,” an ambitious five-year development plan to assist the country in reaching “middle income” status. This brief considers the manner in which Ethiopia’s public and private banking systems affect the development of the national economy, with particular reference to anti–money laundering and countering the financing of terrorism vulnerabilities. Ethiopia is not alone in facing this challenge, as banking industry liberalization is a key consideration in a range of countries, from large economies such as India to regional neighbors such as Uganda, particularly as the 2008 global financial crisis has raised some important questions about the merits of uncontrolled banking industry development.
Ethiopia has experienced notable economic growth over the last ten years, but its foreign exchange controls appear restrictive in comparison to peer group countries. This brief considers the manner in which foreign exchange control regimes and remittances affect Ethiopia’s economic development and the challenge of imposing appropriate anti–money laundering and countering the financing of terrorism policies without hindering or limiting the important developmental role played by remittance flows. Although this brief focuses on the extent to which these overlapping issues impact Ethiopia, it is important to note that other countries in and beyond the region are also facing these issues as they seek to use such controls to support and protect their economies and currencies.
This joint CGCC and United Nations report summarizes the outcomes of a multiyear project led by the UN and aimed at developing a common understanding of sound practices to counter the risk of terrorism financing through the nonprofit sector, protecting the sector and preventing terrorist abuse of nonprofit organizations. The project included two global-level meetings and five regional-level expert meetings. More than 50 states and 80 nonprofit organizations participated in the meetings, in addition to representatives of relevant UN and multilateral agencies, officials from the Financial Action Task Force (FATF) and FATF-style regional bodies, and the financial sector.
Money laundering and terrorist financing pose an ongoing challenge for countries in the greater Horn of Africa and the international community as a whole. In addition to negatively affecting the integrity and stability of national financial systems, they also threaten national security and undermine economic development. The Anti-Money Laundering and Countering Terrorist Financing Regime in Ethiopia: Second Assessment Report builds upon an assessment conducted in early 2012 for a baseline study on anti-money laundering and countering the financing of terrorism (AML/CFT) in East Africa. This second assessment report identifies key areas of progress, limitations and challenges to, and opportunities for the ongoing development of Ethiopia’s AML/CFT regime. It also outlines recommended entry points to further strengthen and expedite AML/CFT efforts in compliance with regional and international standards.
This report examine issues of money laundering and terrorism financing in East Africa, which pose a significant threat to security and development in the subregion.
Both the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group have identified a number of states in the subregion as demonstrating weak implementation of international standards on anti–money laundering (AML) and countering the financing of terrorism (CFT) issues. There is consequently a growing recognition that states of the Intergovernmental Authority on Development (IGAD) stand to benefit in multiple ways from a more concerted effort to combat money laundering and terrorism financing. There is also, however, a chronic limitation of data and knowledge about the problems of money laundering and terrorism financing and about AML/CFT vulnerabilities, risks, and capacities in the subregion.
In this study, the IGAD Security Sector Program (ISSP) and CGCC set out to provide a more detailed and nuanced analysis of AML/CFT challenges and opportunities in the IGAD region. The study responds to repeated requests by the ISSP’s and CGCC’s partners in the subregion who sought assistance in obtaining baseline data about money laundering risks and AML capacity in the region and guidance on the data’s potential use for CFT efforts. Experts from the East African and Horn of Africa subregion coordinated and conducted the project and, where appropriate, drew on outside expertise. The study was prepared by independent researchers with support and guidance from the ISSP and CGCC and an informal advisory group of interested officials, academics, and business professionals from the subregion.
