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Journal of Money Laundering Control

Measuring Qatar’s compliance with international standards on money laundering


and countering the financing of terrorism
Jon Truby,
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Jon Truby, (2016) "Measuring Qatar’s compliance with international standards on money laundering
and countering the financing of terrorism", Journal of Money Laundering Control, Vol. 19 Issue: 3,
pp.264-277, doi: 10.1108/JMLC-04-2015-0011
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JMLC
19,3
Measuring Qatar’s compliance
with international standards on
money laundering and countering
264 the financing of terrorism
Jon Truby
Qatar University, Doha, Qatar
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Abstract
Purpose – Under scrutiny in light of the growing threat of international terrorism, Qatar faces
pressure and accusations that it is not doing enough to counter terror financing and clamp down money
laundering. The issue is not that Qatar is avoiding positive action, but that by the time measures are
implemented, they become outdated because the international community has by then tightened its
regulatory requirements. Qatar’s slow pace has led to a case of cat-and-mouse chase with respect to
updating its standards, with a revised set of rules being required by the time Qatar implements the last
set of international standards. This study aims to draw on lessons from the past to help Qatar avoid
findings of it falling below international standards in the upcoming 2017 mutual evaluation.
Design/methodology/approach – The primary purpose of this article is to catalogue Qatar’s efforts
to comply with international anti-money laundering (AML) and anti-terror finance standards. It
demonstrates the real legislative progress post-2008 recorded by Qatar to minimize money laundering
and terrorist financing. The paper also contests the view that Qatari law is insufficient.
Findings – The paper explains Qatar’s efforts to comply with the recommendations made by each
evaluation by the Financial Action Task Force (FATF). It also highlights the potential for Qatar to be
caught out again by the evolution of international expectations in an upcoming review, which, it is
understood, is likely to take place in 2017.
Originality/value – No article exists specifically on this research field. As Qatar prepares for its 2017
FATF evaluation, it should be reminded of the need to comply with all new standards.
Keywords Qatar, FATF, Money laundering, Combating money laundering, Terror finance,
Terrorist finance
Paper type Research paper

1. Introduction and Methodology


Under scrutiny in light of the growing threat of international terrorism, Qatar faces
pressure and accusations that it is not doing enough to counter terror financing and
clamp down money laundering[1]. Some have even accused elements within Qatar of
funding terrorism[2], forcing the country’s Emir to publicly deny such allegations in his
first-ever televised interview[3]. Such allegations are not only politically damaging, but
may also hinder mutually beneficial opportunities for foreign investment (Kratsas and
Truby, 2015).
Journal of Money Laundering
Control Despite such assertions, the State of Qatar has gone to significant lengths to amend
Vol. 19 No. 3, 2016
pp. 264-277
its laws and comply with international regulations. From being a founding member of
© Emerald Group Publishing Limited
1368-5201
MENAFATF (the Middle East and North Africa Financial Action Task Force), to
DOI 10.1108/JMLC-04-2015-0011 forming the Qatar Financial Information Unit, to amending and implementing national
legislation, Qatar has indeed taken significant action to tackle the international problem Financing of
of money laundering and the financing of terrorism. International Monetary Fund (IMF) terrorism
evaluators have noted that “Qatari authorities are very conscious of the potential
reputational risk to Qatar posed by money laundering and the financing of terrorism”[4].
The issue is not that Qatar is avoiding positive action, but that by the time measures
are implemented, they become outdated because the international community has by
then tightened its regulatory requirements. Qatar’s slow pace of achieving technical 265
compliance with the stringent rules required by the international community has led to
an historical case of cat-and-mouse, with a revised set of rules being required by the time
Qatar implements the last.
The primary purpose of this article is to catalogue Qatar’s efforts to comply with
international anti-money laundering (AML) and anti-terror finance standards. It
demonstrates the real legislative progress post-2008 recorded by Qatar to minimize
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money laundering and terrorist financing. The paper also contests the view that Qatari
law is insufficient.
The approach will be to primarily summarise, in general terms, the progress that has
been recorded since 2008 under the central themes reflected in the Financial Action Task
Force (FATF) standards. This will be illustrated with a more detailed exposition of the
approach taken in the legislation on selected FATF recommendations of a critical
nature. The topic is broad due to the numerous central pillars of the FATF standards
that require evaluation, and subjecting all of these to analysis is beyond the scope of any
one article. As such, this study is not comprehensive in coverage but instead illustrates
the extent of the transformation to date by using two examples from the central pillars
of the FATF standards. Specifically, these will be core standards where Qatar was found
not to be in full technical compliance, namely criminalisation of both money laundering
and terrorist financing.
The article will initially chart the emergence of the FATF standards, the association of
Qatar with the FATF via the Gulf Cooperation Council (GCC) and subsequently through
membership of the MENAFATF. Towards the end of the article, it will describe the 2012
changes to the FATF standards and the new challenges, which are presented by the 2013
mutual evaluation methodology and which will be the basis for the next assessment of
Qatar. It will further highlight the potential for Qatar to be caught again by the evolution of
international expectations in an upcoming review, which, it is understood, is likely to take
place in 2017.

2. Background and context


In any study of the compliance of Qatar with international standards in the related
spheres of countering money laundering and the financing of terrorism (AML/CFT),
pride of place must be afforded to the work of the Paris-based FATF. Since its
creation, at the behest of the group of seven (G7) Paris Summit in 1989, it has become
the most important international standard-setting and policy-making body in this
high profile area.
Initially the FATF had a single-issue agenda, namely to set standards and
promote the implementation by members of the international community of legal,
operational and regulatory measures to combat the laundering of the proceeds of
crime. To this end, it formulated in 1990 a package of 40 recommendations for
national action with three central themes:
JMLC (1) to encourage specific enhancements to national criminal justice systems;
19,3 (2) to strengthen relevant forms of international cooperation; and
(3) to engage the financial sector and other vulnerable businesses and professions in
efforts to prevent and detect money laundering.

Since then, the FATF has revised and updated these standards on several occasions.
266 This it did for the first time in 1996 and again, though in a more comprehensive manner,
in 2003 (Gilmore, 2011). Importantly, following the 9/11 attacks against the USA in 2001,
the issue of the financing of terrorism was added to the FATF mandate and nine
recommendations were formulated to address this new dimension of its work (Gilmore,
2011, pp. 126-132). The FATF standards were again revised in February 2012[5]. This
ushered in a number of changes of form and substance which are outlined at a later stage
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of this article. In addition, the rnow address, for the first time, the financing of the
proliferation of weapons of mass destruction.
Over the same period, the FATF has incrementally expanded its membership. It
presently consists of 34 Organisation for Economic Cooperation and Development
OECD nations and strategically important countries and territories plus two regional
bodies – the European Commission (EU) and the (GCC) of which Qatar is an important
member. A modest further expansion of membership is now underway. TheFATF has
also, over time, promoted the establishment of FATF style regional bodies (FSRBs), the
members of which are committed to the effective implementation of the
recommendations. There are currently eight FSRBs. The most relevant of these for
present purposes is the MENAFATF in which Qatar is a full and active participant. All
of these regional groupings now enjoy the status of associate members of the FATF.
This status category, established in 2005:
[…] seeks to afford greater participation of members of regional bodies in the processes within
the FATF and provide the regional bodies enhanced access to and influence on FATF policies
and decisions[6].
In addition to its standard setting work, the FATF also pioneered an innovative and
intrusive peer review process known as mutual evaluation (Levi and Gilmore, 2002). In
this manner, the FATF assesses, on a periodic and country specific basis, the level of
compliance of each of its members with the recommendations. The FATF has completed
three full mutual evaluations rounds to date and embarked on the fourth such cycle in
the course of 2014. This evaluation process, which now involves the use of a common
methodology, is also utilised by the FSRBs (Gilmore, 2015).
As noted above, the mutual evaluation procedure was initially developed in the early
1990s with existing FATF member states and territories in mind. How best to extend it
to the two institutional members (the EU and the GCC) was somewhat problematic. The
issue was perhaps less acute in the context of the former as some 15 members of the EU
(as it now is) were individual FATF members. However, none of the six members of the
GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) were task force
participants in their own right. Over time, the absence of regular monitoring procedures
for these countries emerged as a source of concern. In May 1997, agreement was reached
on how to carry out an evaluation of the measures taken by them. The first step was to
distribute self-assessment questionnaires. Unfortunately, the partial and incomplete
nature of the subsequent returns made it impossible to form a view as to the true state of
compliance. Consequently, it was agreed that a high-level FATF mission would be Financing of
dispatched to the GCC secretariat to seek further information and “to discuss how to terrorism
improve the implementation of effective AML systems in the Gulf region”[7]. This
mission eventually took place in January 1999 and resulted in a commitment to provide
all outstanding information required for the self-assessment exercise. In addition, the
discussions set in train a process, which was to result in all GCC members agreeing to
undergo mutual evaluations. However, “given the unique position of the GCC […], it was 267
decided that mutual evaluations of its member states should be a joint FATF/GCC
process”[8].
It was within this context that the AML measures put in place by Qatar first came to
be assessed against international standards. The evaluation team visited Qatar for its
on-site visit from 21-23 May 2001 and the resulting report, which in keeping with the
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then FATF practice was (and remains) confidential, was adopted by the FATF plenary
meeting in June 2002.
The evaluation was based on the pre-2003 FATF recommendations. Furthermore:
[the] Special Recommendations on Terrorist Financing had not been adopted by the time of the
on-site visit and the mutual evaluation also pre-dated the adoption by the FATF, IMF and the
World Bank of a methodology for assessing compliance with the FATF 40 ⫹ 9[9].
What the report reveals was an AML system which was still at a relatively embryonic
stage of development. The measures then in place were perhaps most mature in the
sphere of prevention and especially in sectors subject to the authority of the Qatar
Central Bank. For instance, in 1999 the Central Bank had issued Circular No 33. As the
FATF was to note in its 2001-2002 annual report:
The measures included in the Circular cover many of the necessary preventative measures
including customer identification, record keeping, suspicious transaction reporting, and
requirements for internal controls and training[10].
Progress in other areas, such as the criminal law, had been less impressive. Indeed, at the
time of the on-site visit money laundering as such was not a criminal offence under
Qatari law. However:
Qatari ministers and their officials showed a high level of commitment to addressing the
issue of money laundering during the mutual evaluation visit. They expressed their
willingness to cooperate with the FATF to enact necessary legislation and thus strengthen
the Qatari AML -system[10].
The practical fruits of this governmental commitment were to be manifested in various
ways in the years which followed. For instance, the process of legislative modernisation,
in this context, is well-illustrated by the enactment of Law No. 28 of 2002 on Combating
Money Laundering[11] and Law No. 3 of 2004 on Combating Terrorism. Qatar also acted
to create a Financial Intelligence Unit (QFIU) in 2004, which became a member of the
influential Egmont Group the following year[12].
Substantial progress had thus been recorded in meeting the deficiencies identified in
the 2002 report when the time came for Qatar to undergo its next evaluation of
compliance with international standards some five years later. However, by that stage
the relevant institutional framework had been transformed, the standards were
amended and the evaluation process itself was substantially modified.
JMLC Subsequent to the Qatari evaluation, the GCC countries became founding members of
19,3 MENAFATF, a FATF-style regional body (FSRB), while the GCC maintained its
institutional membership of the Paris-based task force. To take account of this complex
reality, it was agreed that evaluations of the six “will be conducted as joint FATF/
MENAFATF evaluations, with MENAFATF taking the lead in organising the
evaluations”[13]. It was this revised institutional arrangement that governed the
268 2007-2008 evaluation.
Significantly, when the assessment team consisting of IMF staff members and a law
enforcement expert acting under IMF supervision arrived in Qatar in February 2007 to
conduct its on-site visit, its mandate was to assess compliance with the 2003 amended
version of the FATF recommendations as well as the nine Special Recommendations on
the financing of terrorism. The benchmark for assessment thus differed substantially
from that which had formed the basis for the previous evaluation exercise. In addition,
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the process was governed by a new, detailed and complex methodology[14] utilised by
the FATF, the FSRBs, the IMF and the World Bank. One major innovation brought
about by this methodology was the introduction of a formal compliance rating system
for each of the then 40 recommendations and the individual Special Recommendations
on the financing of terrorism. These were as follows:
• “Compliant” (C): The Recommendation is fully observed with respect to all
essential criteria.
• “Largely compliant” (LC): There are only minor shortcomings, with a large
majority of the essential criteria being fully met.
• “Partially compliant” (PC): The country has taken some substantive action and
complies with some of the essential criteria.
• “Non-compliant” (NC): There are major shortcomings, with a large majority of the
essential criteria not being met.

It is also of importance to note that while the primary focus of the evaluation
remained on formal compliance with the detailed requirements embodied in each of
the FATF standards, the evaluators were also mandated to address the extent to
which they had been effectively implemented in practice. In the words of the
methodology, “it is essential that all of the FATF Recommendations are effectively
implemented and that assessments or evaluations address this issue and reflect it in
the rating”[15].
The comprehensive report on Qatar, running to in excess of 200 pages, was
“presented to MENAFATF and FATF and adopted by these organisations at their
respective plenary meetings of April 2008 and June 2008”[16]. The outcome can only
be described as disappointing – in that it received either PC or NC ratings on a total
of 37 Recommendations. Qatar received the highest rating (C) in respect of only two
of the standards subject to evaluation. While the reasons for this outcome are
many and varied, it appears that the major focus of the relevant authorities had been
on addressing deficiencies identified in the 2002 evaluation and that insufficient
attention had been paid to the challenges arising from the new or revised standards
and procedures. As the 2008 report notes:
[…] the FATF standard has undergone significant changes since Qatar was last assessed
and the AML Law was enacted. Moreover, the FATF standard now requires that key
measures be contained in laws, regulations, or other enforceable instruments and that the Financing of
effective implementation of the measures in place also be assessed. Accordingly, the
progress made by the authorities since the last assessment has been overshadowed in
terrorism
many areas by the stricter requirements of the new standard [17].
In response, the relevant authorities reiterated their commitment:
[…] to the continued development of a robust AML/CFT framework including the
development of a legal and regulatory regime that will ensure ongoing high-level compliance 269
with the FATF 40 ⫹ 9 Recommendations [18].
And announced several initiatives to that end.
Given the problematic outcome of the 2008 evaluation, Qatar was placed in a
regular follow-up process by MENAFATF so that it could appropriately monitor
future progress. A further impetus towards compliance came with consideration of
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the Qatari situation by the FATF in the context of its International Co-operation
Review Group (ICRG) process. As has been noted elsewhere, this procedure, which
affords a significant role to the FSRBs, was reinforced and revitalised in the course
of 2009[19]. Of particular relevance for present purposes is that one of the methods
through which a country would come to the attention of the ICRG[20] was tied
directly to the outcome of the mutual evaluation procedure. Here the focus was on
the results achieved in respect of the most important of the international standards;
the 16 so-called core and key recommendations[21]. Any jurisdiction attracting 10 or
more NC or PC ratings for the relevant recommendations was to be “automatically
referred to the ICRG for prima facie review”[22]. In the case of Qatar, the 2008 report
included 12 PC or NC ratings of such recommendations[23]. These were in relation to
the following:
(1) Core recommendations:
• Criminalisation of money laundering and terrorist financing (R.1 and
SR.II).
• Customer identification and record keeping requirements (R.5 and R.10).
• Suspicious transaction reporting (R.13 and SR. IV).
(2) Key recommendations:
• International cooperation and assistance (R.35, R.40, SR.I and SR.V).
• Freezing of terrorist assets (SR.III).
• Regulation and supervision (R.23).

In February 2010, the FATF issued a public document entitled “Improving AML/
CFT Compliance: On-Going Process”, which listed 20 jurisdictions which had been
examined through the revised ICRG procedures and had been deemed to have
strategic deficiencies[24]. All had, however, developed an action plan and provided
a high-level political commitment to address the identified deficiencies. In the case of
Qatar, the areas requiring priority attention identified by the February 2010
document were as follows:
[…] adequately criminalising money laundering and terrorist financing (Recommendation
1 and Special Recommendation II); implementing adequate procedures to identify and
freeze terrorist assets (Special Recommendation III); instituting adequate regulatory
JMLC instructions for AML/CFT, particularly with regard to customer due diligence
(Recommendation 5); and ensuring that financial institutions are properly fulfilling their
19,3 obligations to report suspicious transactions and are receiving appropriate guidance
(Recommendation 13 and Special Recommendation IV).

270 3. Qatar’s progress illustrated


As noted above, the outcome of the 2008 mutual evaluation identified significant
deficiencies in the satisfaction by Qatar of a broad range of FATF standards. None of the
central pillars reflected in these standards was immune to criticism. The Qatari
authorities then acted with some expedition to enhance its level of compliance. This can
be well illustrated by the initiatives undertaken with respect to the fundamental
building blocks of any AML/CFT system, namely the criminalisation of money
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laundering (R.1) and the criminalisation of the financing of terrorism (SR.II). Both
received a PC rating in that evaluation.
It will be recalled that at the time of the first evaluation of Qatar, which concluded in
June 2002, money laundering was not a criminal offence in the jurisdiction. This
situation was addressed for the first time later that year with the enactment of Law No.
28 on Combating Money Laundering. In doing so, the legislative process naturally took
account of the then rather open textured nature of the relevant international standards
as reflected in R.4 as amended in 1996. This had extended the obligation to criminalise
money laundering beyond the 1990 focus on the proceeds of drug offences to embrace
other serious offences. However, under R.4 “each country would determine which
serious crimes would be designated as money laundering predicate offences”.
Subsequent to the enactment of the Qatari legislation, however, the FATF standards in
this respect were tightened markedly. In particular, the 2003 version of the FATF
requirements (contained in R.1) embodied the view that jurisdictions “should apply the
crime of money laundering to all serious offences, with a view to including the widest
range of predicate offences”. It acknowledged, however, that that goal could be achieved
in different ways; on an all-crimes basis, through recourse to a threshold of punishment
system, by using a “list” approach or indeed through a combination of such devices.
However, it further required that under whatever the system resorted to, “each country
should, at a minimum, include a range of offences within each of the designated
categories of offences”. These 20 designated categories were listed in the glossary to the
recommendations and ranged widely.
Save for an amendment to the money laundering offence in 2003 through Decree Law
21 to include, inter alia, terrorist crimes in the list of predicate offences Qatar did not
otherwise legislate, prior to the second evaluation of 2008, to address the new FATF
requirements in this context. It was therefore unsurprising that evaluators were able to
identify shortcomings with the law as then in force. They concluded, for example, that
15 of the required FATF categories of offences were not covered (see para.140).
Furthermore, the evaluators were of the view that:
The choice of predicate offences in the AML Law appears somewhat arbitrary in the sense that
it does not reflect all the main proceeds generating crimes that occur in Qatar (para.138).
Two further technical compliance concerns were identified by the evaluators: the
approach adopted the mental element of the money laundering offence and the limited
circumstances in which the courts of Qatar could take cognisance of extra-territorial
predicate offences. The report also expressed concerns over the level of effectiveness of Financing of
implementation of criminalisation perhaps best evidenced by the then lack of any terrorism
money laundering convictions.
Yet again the Qatari authorities responded in a positive and timely fashion to the
conclusions contained in the 2008 Report. By the time of the fourth MENAFATF
follow-up report on Qatar of 28 April 2012[25], it had made much progress towards
aligning the jurisdiction with the recommendations of the evaluators. In particular, 271
Qatar enacted Law No. 4 of 2010[26], whereby Article 2 of Chapter 2 expanded the range
of predicate offences in line with the recommendations, replacing Law No. 28 of 2002 on
Combating Money Laundering. This added predicate offences such as participation in
an organized criminal group which were not previously covered. The courts had also
convicted two persons of money laundering offences contrary to the 2010 law[27]. The
extraterritorial deficiency was found in the 2012 report to have been corrected by the
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2010 law[28] as had the mental element deficiency in the 2002 law on concealing or
disguising[29] the illegal origin of funds[30].
Insofar as the financing of terrorism is concerned, the 2002 mutual evaluation report
was of no real assistance in helping to focus the work of the Qatari authorities. It will be
recalled that prior to the events of 11 September 2001 the issue of terrorist financing had
not assumed a position of prominence in the activities of the FATF and none of its
recommendations directly addressed this important matter. This was the position when
the first evaluation team visited Qatar for its on-site visit in May 2001.
The FATF Special Recommendations on the financing of terrorism were first
formulated in October 2001 and thus fell out with the ambit of the original evaluation.
SRII required members of the international community “to criminalise the financing of
terrorism, terrorist acts and terrorist organisations. Countries should ensure that such
offences are designated as money laundering predicate offences”. The conditions
governing the satisfaction of these requirements were set out in some detail in an
interpretative note. Qatar criminalised terrorist financing in Article 4 of Law No. 3 of
2004 on Combating Terrorism. As noted earlier, it also amended the money laundering
offence in 2003 so as to include terrorist crimes in the list of predicate offences.
Notwithstanding these initiatives, the 2008 mutual evaluation report afforded Qatar
only a PC rating in respect of SRII. Three factors contributed to this outcome:
(1) the “motive” requirements in the 2004 law were not fully in line with the
international standard;
(2) the legislative approach to the issue of the provision or collection of funds to be
used by individual terrorists or for terrorist acts was deficient; and
(3) concerns that the law was not being effectively implemented in practice.

Again action has been taken by the authorities to improve the position. The April 2012
MENAFATF follow-up report concluded that the first deficiency related to the issue of
motive of financing was addressed through the new Article 1 of the 2010 Law, which
redefined terror financing recommendations. The same Article 1 was found to have
addressed the omission in the 2002 law to criminalise the provision or collection of funds
for terrorism by widening the scope of the definition[31]. The issue of poor enforcement
of the law was addressed, but only insofar as to list a nominal number of investigations
and say that as the framework was new, there were no new terror financing cases being
JMLC investigated by the public prosecution[32]. Although most of the legislative drafting
19,3 matters had been dealt with, the latter point did highlight a weakness in the effectives of
enforcement and investigating.
Qatar’s improvements in these areas, among others[33], enabled it to be removed
from the ICRG high priority list in October 2010 and to exit from MENAFATF regular
follow-up process in April 2012. Although Qatar had made significant progress
272 following the criticism and recommendations of the 2008 report, that evaluation was
based on the 2003 FATF standards and the Special Recommendations. However, those
standards were again amended in February 2012, setting a new international
benchmark for compliance which Qatar will have to satisfy[34].

4 Future challenges
The most recent revisions to the FATF standards were, as noted above, agreed to in
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February 2012. These have brought about a number of changes of both form and
substance. Insofar as the former is concerned, the nine Special Recommendations on
terrorist financing have now been fully integrated within the 40 recommendations. This
is intended to reflect both the fact that this is now a well-entrenched concern and the
close connections between AML measures and measures to counter the financing of
terrorists. In addition, there has been a significant expansion of the text of the
recommendations and the associated interpretive notes in an effort to bring greater
clarity and specificity to the standards. The internal structure in which the
recommendations are presented has also been altered in a major way. For instance, the
expectations in regard to the criminalisation of money laundering are now contained in
R.3; those in respect of the terrorist financing offence are embodied in R.5.
The main changes of substance include the following:
• The recommendations now contain, for the first time, treatment of the financing of
the proliferation of weapons of mass destruction. In particular, a new
recommendation (R.7) is aimed at ensuring consistent and effective
implementation of targeted financial sanctions in this sphere when these are
mandated by the UN Security Council.
• There has been an expansion of the scope of AML predicate offences to embrace
tax crimes (related to direct and indirect taxes) and to add a specific tax dimension
to the pre-existing obligation in relation to smuggling offences.
• There has been a strengthening of the AML regime as it relates to corruption
especially in the context of the treatment of PEP’s (R.12) and in relation to the
implementation of the obligations contained in the UN Convention against
Corruption.
• There are enhanced requirements relating to transparency of the ownership and
control of legal persons and arrangements (and in the context of the parties to wire
transfers).
• There are more stringent expectations concerning the role of law enforcement
agencies and FIU’s in the efforts to combat money laundering and FT. This is
especially evident in the law enforcement sphere. Here, a major emphasis is now
placed on the establishment of pro-active financial investigations in all cases
related to major proceeds generating offences, not just those in which money
laundering conduct is in issue.
However, perhaps the most significant changes agreed to in February 2012 relate to the Financing of
centrality now afforded to the risk-based approach. This is reflected primarily, but by no terrorism
means exclusively, in the new FATF Recommendation 1 and in its lengthy
interpretative note. It is true that the relevance and utility of a risk-based approach to
money laundering was recognised in the 2003 FATF recommendations. However, what
is new is that the understanding of risks and the taking of measures to mitigate those
risks have now become, in effect, the fundamental building blocks for national AML 273
systems.
Insofar as countries are concerned, the new standards, in essence, require – for the
first time – a formal national risk assessment be undertaken. This is a new and exacting
challenge for most members of the international community. No set methodology is
established for the purpose. However, in February 2013, the FAFT produced extensive
guidance on options available to jurisdictions in addressing this matter. In addition, R.1
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requires that countries:


• designate an authority (or mechanism) to co-ordinate actions to assess risk;
• keep the risk assessment up to date; and
• have a mechanism to produce information on the results to all relevant national
competent authorities, financial institutions and other obligated bodies.

Based on this understanding of national risks, countries must apply a risk-based


approach to allocating resources and implementing measures to prevent or mitigate
money laundering and terrorist financing. While countries are afforded great
flexibility in how to approach and conduct national risk assessments, it must be
stressed that the final product will be subject to assessment in the context of the next
cycle of mutual evaluations. The common methodology governing that process was
finally agreed to in February 2013. It emphasises that assessors “should not
critically accept a country’s risk assessment as correct and need not follow all its
conclusions” (para. 7). In reviewing it, assessors “should consider the rigour of the
processes and procedures employed and the internal consistency of the assessment”.
They should take a “common-sense approach to whether the results are reasonable”
(para. 15). It is necessary to stress the importance of securing a favourable
assessment of R.1. A deficient national risk assessment finding can have a cascading
effect undermining risk-based measures in other recommendations.
Compliance by individual countries with the revised recommendations of
February 2012 will be monitored through a new cycle of country-specific mutual
evaluations conducted according to an agreed methodology. The joint
FATF/MENAFATF evaluation of Qatar is likely to take place in 2017. In this area
also, significant changes have been agreed and are embodied in the new
methodology of February 2013. Under the new procedures, two inter-linked
evaluation reports will be produced for each jurisdiction subject to the process.
First, there will be a technical compliance assessment. This will address compliance
with the specific requirement of each recommendation. As in the past, a rating will
be allocated to each recommendation. Effectiveness issues will not be relevant in
this context. Insofar as Qatar is concerned, it will be necessary to consider, well in
advance, the evaluation of the extent to which legislative or other action is required
to ensure an adequate level of compliance, both with any of the more exacting FATF
JMLC standards and with those recommendations the substance of which has not changed
19,3 but where deficiencies had been identified in the 2008 report. It should be born in
mind that the MENAFATF follow-up of procedures was restricted to an analysis
only of the core and key pre-2012 standards. Any Qatari “gap analysis” will have to
be comprehensive in its coverage. In order for Qatar to fulfill its need to undertake a
national risk assessment, the QFIU in 2013 launched a National Risk Assessment
274 Plan[35]. Once completed, it is expected that the QFIU assessment will recommend
the undertaking of appropriate legislative, regulatory and other measures to
address those risks.
The second element of the new process is an effectiveness assessment. This is the
most significant innovation introduced for the fourth round of evaluations and will
be the major focus of the evaluation team during its in-country visit. As has been
noted elsewhere:
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Assessing effectiveness is based on a fundamentally different approach to assessing


technical compliance with the Recommendations. It does not involve checking whether
specific requirements are met, or that all elements of a given Recommendation are in place.
Instead, it requires a judgment as to whether, or to what extent, defined outcomes are
being achieved, i.e. whether the key objectives of an AML/CFT system […] are being
effectively met in practice. (Methodology, p. 14)
In this process, the attention of the evaluation team is directed to 11 so-called
immediate outcomes each of which is said to represent one of the key goals which an
effective AML system should achieve. To assist the evaluators, the new common
methodology sets out, for each of the 11 immediate outcomes, the following:
• the main relevant features;
• the core issues to be considered;
• examples of the types and sources of information that could support the
conclusions on core issues; and
• examples of the specific factors that could support the conclusions on core
issues.

Importantly in the present context, immediate outcome 7 is concerned with the


investigation and prosecution of money laundering offences, while immediate
outcome 9 has as its focus the investigation and prosecution of terrorist financing.
Importantly, the methodology explicitly places the onus on the country concerned to
demonstrate the effectiveness of its system. In its words: “if the evidence is not made
available, assessors can only conclude that the system is not effective”(para. 14). As with
the technical assessment, ratings are also allocated in this context, i.e. for each of the 11
immediate outcomes. They are:
• “High level of effectiveness” (immediate outcome is achieved to a very large extent
and only minor improvements are needed);
• “Substantial level of effectiveness”(the immediate outcome is achieved to a large
extent. moderate improvements needed);
• “Moderate level of effectiveness” (the immediate outcome is achieved to some
extent. major improvements needed); and
• “Low level of effectiveness” (the immediate outcome is not achieved or Financing of
achieved to a negligible extent. fundamental improvements needed). terrorism
No overall effectiveness rating for the jurisdiction is however envisaged.
As highlighted, Qatar has made significant strides to improve its regulatory system.
Unfortunately, it should be reminded to look back at the deficiencies identified in past
evaluations rather than taking account of how those standards have changed. This has
led to a cat-and-mouse chase to comply with the required international standards. It is to
275
be hoped that the dedication, focus and collaboration of the relevant authorities in
Qatar – including the QFIU, the Qatar Central Bank and the National Terrorism
Fighting Committee[36] – will ensure that this unfortunate history does not repeat itself
at the time of the next assessment.
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Notes
1. US calls Qatar, Kuwait lax over terror financing, 23 October 2014, The Wall Street
Journal, www.wsj.com/articles/u-s-calls-qatar-kuwait-lax-over-terror-financing-1414108
799; David Cameron urged to press Emir of Qatar on terror funds, 25 October 2014, The
Telegraph, www.telegraph.co.uk/news/worldnews/islamic-state/11188380/David-
Cameron-urged-to-press-Emir-of-Qatar-on-terror-funds.html
2. Qatar’s Support of Islamists alienates allies near and far, 7 September 2014, The New
York Times, www.nytimes.com/2014/09/08/world/middleeast/qatars-support-of-
extremists-alienates-allies-near-and-far.html?_r⫽0
3. Qatar’s Emir: We don’t fund terrorists, September 25, 2014, CNN, http://edition.cnn.com/
2014/09/25/world/meast/qatar-emir/
4. FATF/MENAFATF, Mutual Evaluation Report: Qatar (9 April 2008), p. 26.
5. See, FATF, International Standards on Combating Money Laundering and the Financing
of Terrorism and Proliferation: The FATF Recommendations (February 2012).
6. House of Lords, European Union Committee, “Money Laundering and the Financing of
Terrorism”, 2008-2009, HL Paper 132 – II, at p. 245.
7. Financial Action Task Force on Money Laundering: Annual Report 1996-1997 (1997), p. 11.
8. Financial Action Task Force on Money Laundering: Annual Report 1999-2000 (2000),
p. 24.
9. FATF/MENAFATF, Mutual Evaluation Report: Qatar (9 April 2008), p. 29.
10. Financial Action Task Force on Money Laundering: Annual Report 2001-2002 (2002),
Annex G, p. 3.
11. As amended by Decree Law No. 21 of 2003.
12. Administrative Order No. (1-2004) Establishing the QFIU and its Organizational
Structure.
13. FATF, Third Round of AML/CFT Mutual Evaluations: Process and Procedures (October
2009), p. 16.
14. See, eg, FATF, Methodology for Assessing Compliance with the FATF 40
Recommendations and the FATF 9 Special Recommendations (February 2009 version).
15. Id., p. 8.
JMLC 16. Supra, note 9, p.8. All of the mutual evaluation reports produced under the common
19,3 methodology are published in full either by the FATF or the relevant FSRB.
17. Id., pp. 29-30.
18. Id., p. 209.
19. See, supra, note 1, at pp. 159-162.
276 20. Dealing with high-risk and non-cooperative jurisdictions, www.fatf-gafi.org/topics/high-riskandnon-
cooperativejurisdictions/more/moreabouttheinternationalco-operationreviewgroupicrg.html
21. See “International Co-operation Review Group (ICRG): Co-Chairs’ Report”, FATF/PLEN
(2009) 41, 8 July 2009, pp. 9-10.
22. Id., p. 10.
23. See, MENAFATF, Mutual Evaluation Report: Fourth Follow-up Report for Qatar (28 April
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2012) at p. 1.
24. www.fatf-gafi.org/countries/j-m/myanmar/documents/improvingglobalamlcftcomplianceupdateon-
goingprocess-february2010.html
25. MENAFATF, Mutual Evaluation Report, Fourth Follow-Up Report for Qatar (2013)
www.menafatf.org/images/UploadFiles/4th_FYR_of_Qatar_Removal.pdf
26. Combating Money Laundering and Terrorist Financing Law, OJ 3/2010 9.
27. MENAFATF, Mutual Evaluation Report, Fourth Follow-Up Report for Qatar (2013)
www.menafatf.org/images/UploadFiles/4th_FYR_of_Qatar_Removal.pdf, p. 7.
28. Clause 3, Article 2, Chapter 2 of Law No. 4 of 2010.
29. Article 1 of Chapter 1 of Law No. (4) of 2010.
30. MENAFATF, Mutual Evaluation Report, Fourth Follow-Up Report for Qatar (2013) www.
menafatf.org/images/UploadFiles/4th_FYR_of_Qatar_Removal.pdf, p. 4.
31. MENAFATF, Mutual Evaluation Report, Fourth Follow-Up Report for Qatar (2013) www.
menafatf.org/images/UploadFiles/4th_FYR_of_Qatar_Removal.pdf, p. 10.
32. MENAFATF, Mutual Evaluation Report, Fourth Follow-Up Report for Qatar (2013) www.
menafatf.org/images/UploadFiles/4th_FYR_of_Qatar_Removal.pdf, p. 10.
33. Qatar had addressed the deficiencies where it had previous failed to comply completely with the
Vienna Convention, as noted in MENAFATF, Mutual Evaluation Report, Fourth Follow-Up
Report for Qatar (2013), www.menafatf.org/images/UploadFiles/4th_FYR_of_Qatar_Removal.
pdf, p. 11. It had also joined the Palermo Convention through Decree No. 10 of 2009, and joined the
International Convention for the Suppression of the Financing of Terrorism via the Council of
Ministers’ resolution in its 29th ordinary meeting of 2007. These actions helped it to improve on its
NC rating. In 2010, the Qatar Financial Centre, a separate jurisdictional body for international
financial businesses, also issued its own version of AML rules through its regulatory authority to
comply with FATF standards for businesses registered within that body – see Qatar Financial
Centre Regulatory Authority, Anti-Money Laundering and Terrorist Financing Rules 2010, (2010)
3 www.qfiu.gov.qa/rules/files/qfcra_en.pdf. On the issue of Corporate Governance in Qatar, see
Joel Slawtosky and Jon Truby, THE DIRECTOR DUTY OF CARE IN QATAR (2015).
34. FATF, International Standards on Combating Money Laundering and the Financing of
Terrorism and Proliferation: The FATF Recommendations (February 2012).
35. QFIU, National Risk Assessment Plan 2013 www.qfiu.gov.qa/files/QFIU_Annual_ENG_2013. Financing of
pdf. At the time of writing, neither the plan itself nor the risk assessment were publicly available.
terrorism
36. Launched by Council of Ministers Resolution No. 7 of 2007 on the establishment of the National
Terrorism Fighting Committee 7/2007.

References
Gilmore, W. (2011), Dirty Money: The Evolution of International Measures to Counter Money 277
Laundering and the Financing of Terrorism, 4th ed., Council of Europe, pp. 95-114.
Gilmore, W. (2015), “Money laundering”, in Boister, N. and Currie, R. (Eds), Handbook of
Transnational Criminal Law, Routledge, pp. 331-344.
Kratsas, G. and Truby, J. (2015), “Regulating sovereign wealth funds to avoid investment
protectionism”, Journal of Financial Regulation, Vol. 1 No. 1, pp. 95-134.
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Levi, M. and Gilmore, W. (2002), “Terrorist finance, money laundering and the rise and rise of
mutual evaluation: a new paradigm for crime control?”, in Pieth, M. (Ed.), Financing
Terrorism, Kluwer, Dordrecht, pp. 87-114.

Corresponding author
Jon Truby can be contacted at: JON.TRUBY@QU.EDU.QA

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