By Obinna Chima
The International Monetary Fund (IMF) has stressed the need for countries to intensify the fight against financing of terrorism as well as corruption and tax evasion.
The fund also disclosed that in the coming days, it would release new analysis that shows how systemic corruption can seriously undermine a countryâ€™s ability to deliver sustainable and inclusive growth.
IMF’s Managing Director, Christine Lagarde, made this call in a speech titled: “Working Together to Fight Money Laundering & Terrorist Financing,” she delivered at the Financial Action Task Force (FATF), on Money Laundering Plenary Meeting in Valencia, recently.
Lagarde described combating of terrorism financing as a top policy priority, saying that as terrorism becomes more pervasive in our societies, it was our collective responsibility to choke off the financial flowsâ€”both large and smallâ€”that enable terrorists to inflict unspeakable suffering on individuals, families, and communities.
Combating the financing of terrorism increasingly requires harnessing the power of financial technology, she said.
She said: “Of course, fintech is a double-edged sword. It can be used to promote and fund terrorism, including through the anonymity of virtual currencies. But it can also be a powerful tool to strengthen our defenses against the financing of terrorism.
“We can use fintech to identify terrorist financial flows, including in the case of very small transactions. Machine learning and other artificial intelligence tools can help identify patterns of activity that would otherwise be very difficult to detect.”
She added: “There is no doubt that money laundering and terrorist financing can threaten a countryâ€™s economic stability, which is why the IMF has become increasingly active in supporting and promoting the AML/CFT efforts of our member countries, based on the FATF standard.
“What started as a small endeavor some 20 years ago has become part of our core workâ€”from analysis and policy advice, to assessing the health and integrity of financial sectors, to providing financial assistance when needed, to helping countries build institutions and increase operational effectiveness.”
According to the IMF boss, large-scale tax evasion is a key factor, because it typically means lower government revenue, higher public debt, and less investment in health, education, and other public services.
This, she also pointed out means higher economic inequality because the most vulnerable are most affected by a sharp drop in social spending. That, in turn, can trigger popular discontent and economic instability.
“The good news is that we can use the AML/CFT framework to help break this vicious economic cycle. A good example is Greece, where the strengthening of the AML framework facilitated the seizure of hundreds of millions of euros in proceeds from tax crimes.
“We helped the central bank strengthen its financial sector supervision, which led to a sharp increase in reporting to the financial intelligence unit. That unit itself froze more than â‚¬200 million in assets between 2012 and 2014. The financial intelligence unit also referred more than 400 cases to the prosecutorâ€™s office and more than 2,500 cases to the tax authorities.
“Both FATF and the IMF are forward-thinking organizations designed to help our members address some of the most pressing global issues of our time. We both are deeply committed to supporting countries in building defenses against money laundering and the financing of terrorism through the AML/CFT standards. We both know that these global challenges cannot be resolved by countries working alone,” she said.
According to her, over the past 16 years, the IMF has been involved in joint effort through our technical assistance and capacity building work.