Emergency meeting on terrorist funds

Money flows are meant to be under sharper scrutiny since 11 September

Terrorist funding is at the top of the agenda for the annual meeting of the world's main body fighting financial crime this week.

The 29-nation Financial Action Task Force (FATF) has for more than a decade been gathering information and encouraging - and enforcing - best practice to try to stem money laundering.

But after 11 September attacks, its mission has expanded to focus on the funding of terrorist organisations.

In October, the body came up with eight recommendations to help law enforcement, financial institutions and other concerned parties track money destined for supporting terrorism.

They include making financing terrorism a criminal offence, getting financial institutions to report suspicious transactions, ensuring that laws are up to date, and providing cross-border assistance.

Keeping score

This meeting, which runs from 30 January to 1 February in Hong Kong, will allow member states to catch up on whether they are making headway.

All member states are meant to have gone through their laws and practices to see how they match up to the recommendations by the end of last year.

But aside from the emphasis on terrorist funding the meeting will also continue the FATF's traditional role of researching the ways in which money from illicit sources is "washed" into the mainstream financial system.

Its annual report on typologies will be updated, concentrating on correspondent banks.

The practice of banks acting as a relay for money transfers without themselves checking on transactions - essentially the role of a correspondent banking agreement - is generally seen as a key tool for money launderers.

Under the microscope

And the session in Hong Kong will also review the sanctions placed on the tiny Pacific island of Nauru - the first ever applied by the FATF.

Nauru has incurred the FATF's wrath by failing to upgrade its regulatory systems to cope with what observers believe is a massive flow of illicit funds, largely from Russia.

The Philippines is also threatened with sanctions, and is already suffering from having been put on the list of "non-cooperative countries and territories" (NCCTs).

Banks in FATF member states are meant to take extra care when processing transactions which have passed through NCCTs, slowing up the flow of commerce.

The country found itself on the list when new anti-money laundering legislation last year was judged to be inadequate.