The Caribbean Financial Action Task Force or CFATF Mutual Evaluation Process and expectations of industry partners was discussed in detail during the BVI Finance Breakfast Forum on March 31.
The presentation was led by a duo from the BVI Financial Service Commission, Ms. Alva McCall, the Deputy Director (AML/ CFT), and Mr. Glenford Malone, the Acting Deputy Managing Director (Regulations).
Ms. McCall explained that the purpose of the evaluation is to assess whether a country has implemented a system that adequately prevents the facilitation of money laundering, terrorist financing or proliferation financing; to identify any deficiencies or gaps in implementing an effective system; and to make recommendations on addressing deficiencies in the AML/ CFT system.
Ms. McCall explained that the National Risk Assessment (NRA) was one requirement of the ‘broad spectrum’ Mutual Evaluation, and the assessment was instrumental in identifying and implementing the necessary legislative framework.
The deputy director said that the upcoming process would be the fourth round of the evaluation, the third one being done in 2008, which looked at the legislative framework surrounding the CFATF’s 40 recommendations. Ms. McCall said the fourth round has “introduced effectiveness”, to ascertain “whether we are effective in mitigating the risks” [identified in the NRA].
What will be assessed during the Mutual Evaluation?
The AML/CFT expert also explained that the NRA is not the same as a Mutual Evaluation, which assesses the entire Territory’s AML/CFT framework, policies, procedures; domestic and international cooperation; level of sanctions, (whether they are effective and dissuasive enough); and BVI’s investigative and prosecutorial capabilities.
Pass or Fail Ratings
About the “effectiveness” rating component of the process, Ms. McCall said, “The methodology outlines a number of ‘core issues’ that the assessors will measure the jurisdiction against to determine the level of effectiveness. It’s a very subjective test, so it’s up to the jurisdiction to provide as much information as possible, and be able to defend itself to convince the assessors it does have an acceptable level of effectiveness to receive a pass rating.”
Regarding Technical Compliance with any of the 40 Recommendations, a rating of ‘Compliant’ or ‘Largely Compliant’ is considered a Pass, while a rating of ‘Partially Compliant’ or ‘Non-Compliant’ is considered a Fail.
Regarding the Effectiveness in meeting the 11 Immediate Incomes (IOs), a rating of ‘High Level Effectiveness’ or ‘Substantial Level Effectiveness’ is considered a Pass, while a rating of ‘Moderate Level Effectiveness’ or ‘Low Level Effectiveness’ is considered a Fail.
The IOs are: Risk, Policy and Coordination (IO1), International Cooperation (IO2), Supervision (IO3), Preventive Measures (IO4), Legal persons and arrangements (IO5), Financial Intelligence (IO6), ML investigation & prosecution (IO7), Confiscation (IO8), TF Investigation & Prosecution (IO9), TF Preventive Measures & Financial Sanctions (IO10), and Proliferation Financing Financial Sanctions (IO11).
Composition of Rating Team & Timeline
The team will comprise of four to five assessors who are trained in methodology from the FATF, and selections will have to be agreed upon by the CFATF Secretariat and the jurisdiction.
The evaluation process begins in July, where the CFATF Secretariat will engage the jurisdiction to agree on the assessment team, followed by BVI’s response to the technical compliance annex questionnaire.
Ms. McCall further explained, “BVI will also be given an opportunity to provide representations on what we consider our effectiveness on the 11 IOs. Out of that information, the assessment team will develop a ‘scoping note’, to determine the more relevant areas of risk during the on-site evaluation in July 2022.”
A draft of the Mutual Evaluation Report should be provided prior to the assessment team’s departure after the on-site evaluation, where the jurisdiction is given an opportunity to respond to findings. The report will then go on to the CFATF Plenary in May 2023; and to the FATF Plenary in October 2023, only if two or more jurisdictions have issues with the report; then onward to publication.
What has BVI done to prepare for the Mutual Evaluation?
The deputy director highlighted BVI’s preparations for the mutual evaluation, including the NRA and implementation of recommendations; development of the National AML/ CFT Policy, completed sectoral money laundering risk assessments for financial institutions; benchmarking exercise against 40 recommendations and identification of gaps; self assessment against the IOs; conducted outreach on risk assessment; and currently finalising Terrorist Financing Risk Assessment; FIA increased personnel to improve timeliness on delivery of Suspicious Activity Reports or SARs; issued guidance on SARs; drafted legislation for compliance with recommendations; finalised and submitted various legislative amendments to the House of Assembly; and the Attorney General’s Chambers has hired staff dedicated to international cooperation matters.
The next few months will see the finalisation of the TF Risk Assessment; enactment of changes to the AML Code and Regulations; the FIA’s outreach for ML sectoral risk assessment, amongst other actions.
Ms. McCall encourages industry partners to review and adjust policies, procedures and internal controls in line with the 2020 sectoral risk assessment; conduct institutional and client risk assessments; ensure they are able to provide evidence of timely and accurate submissions of statistical returns; proper verification and maintenance of beneficial ownership information, which she says can “make or break a jurisdiction”, along with the proper training of personnel and timely filing of SARs.