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ABF Professor Terence Halliday Presents at World Bank Panel on Money Laundering

April 6, 2016, ABF news

From left to right: Jody Myers, Vice President, Compliance Department, Western Union Company; Jean Denis Pesme, Practice Manager, Global Practice, Finance and Markets, World Bank; Jonathan Turley (moderator), J.B. and Maurice C. Shapiro Professor of Public Interest Law, George Washington University Law School; Richard Lalonde, Senior Financial Sector Expert and Coordinator, Anti-money Laundering and Combating the Financing of Terrorism (AML/CFT) Assessment Program, IMF; Terence Halliday, American Bar Foundation.

Photo courtesy of the World Bank

American Bar Foundation Research Professor Terence Halliday participated in a World Bank panel on the effectiveness of anti-money laundering (AML) measures, as well as measures designed to combat the financing of terrorism (CFT).  The program, titled “Clean Solutions for Dirty Money: Closing the Implementation Gap,” was presented on November 16, 2015 at the World Bank Group (WBG) headquarters in Washington, D.C. Halliday was joined by Richard Lalonde, Senior Financial Sector Specialist at the International Monetary Fund (IMF), Joseph (Jody) Myers, VP of Bank Secrecy Act (BSA)/AML Risk Assessment at Western Union, and Jean Pesme, Practice Manager in Finance & Markets Global Practice at the WBG. The panel was moderated by Jonathan Turley, a Professor of Law at George Washington University Law School, and a nationally recognized legal scholar, writer, and analyst for several major media outlets.

Halliday critiqued the status of the existing global AML/CFT regime, including recent changes, weighing the regime’s costs and benefits and offering recommendations for reform.  News stories, as well as new research, have challenged the accepted wisdom as to how effective AML/CFT measures really are.  Each year, staggering sums of money are spent on AML/CFT efforts in countries around the globe.  Yet, notwithstanding the escalating costs of the AML/CFT regime, there have been numerous high-profile, documented failures of the system. “Under existing AML assessment criteria, some corrupt countries that are awash in dirty money score just as well as ‘clean’ countries,” noted the flyer publicizing the panel.  Moreover, the costs of existing AML/CFT measures include not only government expenditures and the costs borne by the private sector, but also humanitarian and political costs, which traditionally have been largely ignored.  Both issues were highlighted by the World Bank panelists.

Humanitarian costs, said Halliday, include adverse effects on the world’s poor, many of whom rely for survival on overseas remittances and informal economies, which are often disrupted by AML/CFT measures.  Political costs include countries’ use of AML measures to jeopardize human rights and to threaten the development of civil society. “At this moment -- whether intentionally or as a byproduct – the system has been operating adversely to civil society,” Halliday emphasized. “Much of the system is directed at potentially shutting down, closing down, constricting, or constraining civil society, or in the hands of the wrong people, being used to domesticate civil society…so it is no longer a center of resistance or the basis for rule of law.”

Halliday said AML efforts would be more effective if they were not abused to oppress civil society. He also stressed the need to “drop the pretense that one set of recommendations or a global formula is going to work everywhere.” Halliday favored an entirely new methodology for assessment based on identifying “clusters” of countries that face similar challenges and have comparable means to address them.  “We can then tailor interventions based on the attributes of those countries – with variations on the theme – and that would lead us to a much more nuanced basis for regulation by the Bank, the Fund, and other international organizations that have a global mandate,” Halliday added.

The panel’s topic was particularly timely, coinciding with the terrorist attacks that struck Paris three days before the program, and, one day earlier, the release of a landmark report by the Global Center on Cooperative Security examining the negative consequences of “de-risking” (the process of financial institutions closing the accounts of clients considered “high risk” under AML/CFT criteria).

The World Bank program, “Clean Solutions for Dirty Money,” was inspired by a 2014 report co-authored by Halliday and specialists Peter Reuter and Michael Levi, which analyzed the effectiveness of the global AML/CFT regime.  The report, Global Surveillance of Dirty Money:  Assessing Assessments of Regimes to Control Money-Laundering and Combat the Financing of Terrorism, was published by the ABF’s Center on Law and Globalization (of which Halliday is a co-director). It was the first independent study of the AML/CFT regime and specifically appraised the methods and criteria used by the IMF and the Financial Action Task Force (FATF) to rate countries’ compliance with AML/CFT standards. The report found that the battle against money laundering is at a critical turning point. It commended the recognition by the IMF and FATF of the many problems that their assessments have identified over the past decade, and noted reforms initiated in 2012 and 2013.  However, the report also  underscored the lack of relevant empirical data and the need for greater focus on whether countries’ compliance with AML/CFT criteria in fact result in positive outcomes – reductions in the extent of money laundering and reductions in the flow of funds to terrorists.

“Clean Solutions for Dirty Money” was presented as part of the World Bank Group’s 2015 “Law, Justice and Development (LJD) Week,” November 16-20, 2015. The program drew one of the largest crowds of the week, attracting an audience of more than 185 people. Held each year, LJD Week brings together World Bank Group staff, senior officials from international financial institutions, government leaders, lawyers, judges, scholars, representatives of civil society, and members of the international development community from around the world.  The theme of the 2015 event focused on the role of governance and the law in the social and economic development of nations.

Co-sponsored by the WBG and the ABA Section of International Law, in cooperation  with the American Bar Foundation,” Clean Solutions for Dirty Money” was organized by the Hon. Delissa A. Ridgway, judge of the United States Court of International Trade, along with Danielle Roosa and Christine M. Makori, both Senior Counsel at the World Bank.  Judge Ridgway is a member of the ABF Fellows Research Advisory Committee and a well-known authority on international commercial law, transactions, and commercial arbitration and litigation. The LJD Week panel is one of many programs Judge Ridgway has organized to encourage meaningful conversation among experts on international law, but her first for the World Bank’s LJD Week.

“This program is yet another example of the real-world impact of the ABF’s innovative research,” Ridgway stated.  “And the World Bank’s LJD Week was the perfect venue to showcase the provocative work of Professor Halliday and his colleagues.  LJD Week is the premier global forum for influential professionals from all fields who are working in the area of international development.”  Ridgway added:  “There could be no better audience for Professor Halliday’s critically important message.  From all over the world, these are the people who need to hear what he has to say about the AML/CTF regime.  This is where the rubber meets the road.”

A full video of the panel can be found here (courtesy of the World Bank).

Posted by: Cheyenne Blount

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