There have been two opportunities this month for our industry to come together and address emerging challenges of evolving financial crime.

The Organisation of Economic Cooperation & Development (OECD) held its Global Anti-Corruption and Integrity Forum in Paris on the 25th anniversary of the signing of the OECD Anti-Bribery Convention.

This was followed by the Financial Action Task Force’s (FATF) Private Sector Consultative Forum in Vienna. Both forums were a timely opportunity for the private sector, governments and regulators to assess the effectiveness of anti-corruption measures, while also discussing the emerging threats to transparency.

Recent initiatives

The OECD’s Forum emphasised much of the positive work of the past decade. Companies around the globe have invested significantly in developing internal controls, ethics and compliance programmes.

The OECD has largely encouraged this and governments have provided incentives to mitigate against bribery and corruption. The OECD’s recently revised guidance on State Measures for Strengthening Business Integrity provides a useful framework for states seeking to implement effective integrity measures, including sanctions for misconduct and incentives for best-practice.

The guidance echoes a consistent message between the FATF and OECD, calling for greater cooperation between the private sector and government to identify good practice to measure effective anti-corruption compliance. The OECD also launched the Anti-Corruption and Integrity Outlook report, identifying how some jurisdictions could improve.

The financial sector and governments largely agree that ensuring consistency in standards, and better use and sharing of data would strengthen compliance. Various representatives from both sectors, particularly the US government, would say data analytics is an important, and perhaps under-used component in transparency. It provides an opportunity to more effectively measure compliance while also driving ethical decisions within companies.

An appetite for further harnessing public-private partnerships in the fight against corruption was also a theme. The OECD recognised Brazil’s implementation of the OECD Anti Bribery Convention as one of several effective models for cooperation between the government and the banking sector. The convention has reached agreement on a collective set of integrity parameters.

FATF’s Private Sector Consultative Forum coincided with the recent publication of its risk-based guidance on Recommendation 25, which sets out clearly the activities permitted in the definition of trust administration. The guidance provides a strong explanation for what functions a trust is supposed to do. While it acknowledges that trusts can be used for illegitimate reasons, it notes they are not the only arrangements utilised for illegitimate means.

Horizon scanning

The financial sector wants to ensure that accuracy of information held on registers is front of mind for FATF and regulators. Registers need to be able to update information promptly when required. Transparency of beneficial ownership remains a sticking point, with confusion in how to define and then provide guidance on this when the definitions of what constitutes a journalist and academia vary in jurisdictions.

Implementing and enforcing Russian sanctions regimes over the last two years has also raised new questions about beneficial ownership, and whether a central entity register is needed to run checks on the trust-related information.

Central Bank Digital Currencies (CBDC) were also on the agenda for FATF. The European Union is preparing a CBDC, which is anticipated to launch in 2025. While there is much noise globally around CBDC, very few countries have yet implemented one. That said, most central banks are actively considering how to navigate a CBDC in what is shaping up to be a complicated global patchwork.

Advocates for CBDCs believe leveraging the programmability and portability of their design will be beneficial. However, many concerns remain that new money laundering and terror financing risks may emerge. Additionally, the unintended consequences on privacy, amplified by generative artificial intelligence, are also red flags that many policy and financial experts involved in the design phase of CBDCs acknowledge.

STEP’s policy team will continue monitor developments in this area.

Ben Bell, Government Affairs Manager at STEP