Anti-money laundering in the Pacific

the head of PALP, Kosi Latu.

by Dionisia Tabureguci

PACIFIC island countries have, at their disposal, a number of donor agencies and institutions that assist them in the establishment or enhancement of their anti – money laundering (AML) and counter terrorist financing (CTF) legislations. One such effort is the Pacific Anti Money Laundering Project (PALP), a combined effort between the Pacific Islands Forum Secretariat (PIFS) and the United States State Department.
Islands Business Magazine spoke to Kosi Latu, head of the PIFS-based PALP who spoke about the progress and other aspects of the project.

When was PALP set up and what is its function?
Latu: The Pacific Anti money Laundering Project, or PALP, the acronym that it goes by, is still a very new set-up. It has been going for about 7 months since September last year and is a joint initiative between the Pacific Islands Forum, the United Nations Office on Drugs and Crime (UNODC) and the US State Department. The PALP is to run for a period of four years and is funded by the US State Department. PALP is a regional technical assistance and training programme designed to assist Forum countries in establishing and/or enhancing their anti-money laundering (AML) and counter terrorism financing (CTF) regimes to comply with international standards of the Financial Action Task Force (FATF), and relevant UN Conventions and Security Council Resolutions.


What has been the progress of PALP’s work so far?
Latu: We have already made some very good on progress on the ground. We have four full time country projects, where we are providing both law enforcement and legal assistance. Those four countries are Tonga, Vanuatu, Palau and the Marshall Islands, which is a new project. We had a request from Fiji, which we’re assessing. We haven’t really done anything in terms of putting into action any measure to implement that project because we are waiting for information to come back from the Fijian authorities before we can move forward. So we have these four projects in those four countries plus a new one from Fiji. In addition to that, we have another four or five countries that we’ve identified, where we could also possibly extend our program. And we have specific areas where we know help can be provided to these countries. So in terms of progress, I think overall, one can say PALP has made a steady and good progress in the last seven months.
The other thing you’ve got to remember is that our Programme is not yet fully staffed. There are four of us, three of whom are professional staff. One, the Legal Mentor, is based in Tonga. The Law Enforcement officer is based in Vanuatu and we’re still trying to recruit a Regulatory Mentor, whose expertise will be used in developing AML/CTF supervisory policies and examination procedures, training programme for examiners/auditors and supervisory authorities in the financial sectors and so forth.
And there’s a possibility of engaging another law enforcement mentor towards the end of the year. So, if you like, we’re operating with a 60 percent complement of our staff but when you look at what’s been done already on the ground, I think one can safely say that a lot of good progress has been done in these past seven months.


How does the relationship work between you and the countries that you are helping and those that have yet to come?
Latu: Well, for these things, we have to prioritise as we are not the only providers of technical assistance in the region. There are other donor agencies that are also providing assistance on these matters. So we have to prioritise in terms of countries that we have targeted and our assistance to them and whatever their needs are.
For example, in the case of Vanuatu, the work that we are doing there is in response to recommendations that were made by the APG (Asia Pacific Money Laundering Group) Mutual Evaluation of Vanuatu in 2005.
That Evaluation identified certain areas requiring assistance. When we discussed this with the Vanuatu authorities, they knew that they had to do something. So we suggested that we provide assistance in reviewing some of their AML/CTF legislations, including Regulations. PALP has developed some draft amendments in a number of areas. So that’s what we’ve done for Vanuatu. In respect of Tonga, a Mutual Evaluation by the APG later on this year was planned. But before they ventured into that, I think they did the right thing by approaching donor agencies such as PALP, asking for help. I think it’s a good sign when countries ask for help before they actually go for these Mutual Evaluations. It is often the case that countries only ask for help after the Mutual Evaluations have been carried out. But in this case, Tonga was seeking help to try and assess where it was. Tonga is also trying and put in place necessary mechanisms by way of legislation before the Mutual Evaluation. So these are just some examples of countries that look for our assistance in terms of legislations, but as I said, it’s all based on where the priorities are and the priorities are all based on whether these countries have either undergone Mutual Evaluations or are in the process of going through Mutual Evaluations. And that in itself is a start, which helps determine where resources can be applied and finances can be diverted to.

What is the situation with Forum island countries, in terms of anti-money laundering and terrorist financing legislations? And whom do we benchmark our status against?
Latu: Your question poses a number of different issues. You’ve mentioned the word “benchmark”. Well, there are the benchmarks that are developed and established internationally and are recognised internationally for countries to comply with. The international standards, in terms of money laundering and terrorist financing are actually developed by the Financial Action Task Force, which is an international organization based in France. It develops international standards with the view that they would help countries take actions to remove certain weaknesses or remove certain vulnerabilities in their anti money laundering and counter terrorist regime. If countries put into place the right mechanisms and appropriate measures, these standards cover a whole range of areas. We don’t have time to discuss all of that but I can say just by way of overview that the standards cover the legal, the regulatory or the financial sector and the law enforcement sectors. So in terms of legal measures, for example, countries are expected to put in place legislations that, in the first instance, at least should criminalize money laundering and terrorist financing. And also define what money laundering is– in some cases, countries are not able to prosecute effectively because the legislation does not provide effectively for the criminalizing of money laundering and therefore, there is no sound legal basis for them to prosecute successfully. So I guess the first step that countries need to do in terms of legislation is to make sure that the legislation provides them with the ability to criminalise money laundering and financing terrorist and also to provide them with the ability to prosecute successfully. This is not only the case in the Pacific. Most countries have legislations, some probably much stronger than others. But you can have all the best legislations in the world, yet if you don’t enforce them, they will mean nothing. The issue here therefore is not so much just putting legislations on the books. It’s what you do with the legislations that I believe is the key t measure for whether a country is successful or not. A country may be said to have a strong anti money laundering and counter terrorist financing regime depending on whether they’re actually implementing those legislations and not just saying: ‘well, here’s a piece of legislation’. I think there is a certain temptation there for countries to just show a whole list of legislations being enacted and passed but then the issue is: ‘is it being used effectively?’ And that, I believe is the key questions, not just for Pacific island countries but for all countries when you look at combating money laundering and countering terrorist financing.

Have Pacific island countries reached that stage of criminalizing money laundering and terrorist financing?
Latu: Well, it varies from jurisdiction to jurisdiction. Most countries in the Pacific now have that but there are still some weaknesses where certain offences are not defined as being predicate offences for money laundering. It’s very important that the legislation doesn’t just criminalize money laundering but that it is able to have a much wider, broader coverage. At the moment, the international standard is that all serious crimes must be predicate offences for money laundering. And some countries need to step up to that mark. So, you know, it is not a matter of us just saying: ‘we hereby are defining money laundering as such and such’. Money laundering is proceeds of crime and the issue is, what offences must be covered under money laundering? And the international standards say, at the most, that it’s all serious crimes. So there’s a lot of awareness that need to be done. I also mentioned the ability of countries to also prosecute effectively. Well, a whole draft of measures is needed in order to get there. First of all, you need to make sure that your law enforcement officials, your prosecutors and other personnel are trained properly.
And these are very technical areas. If you don’t get it right, then you’ll be wasting your resources. In the end, the countries have got to have the ability to be able to trace, track, seize, confiscate and even forfeit proceeds of crime. These are important factors. It is one thing to criminalize money laundering but if you don’t have the ability to seize, confiscate and forfeit, then you may end up convicting the criminals while their assets remain in a safe place. So it is not about just trying to get the criminals behind bars, it’s also about efforts to get to their assets, that dirty money. You know most criminals are prepared to go to jail, as long as they know that their millions are stacked away safely. So the whole approach to money laundering has to be different. You have to ensure that the criminals doesn’t prefer to go to jail, although, you know, criminal justice would require that they dearly pay for what they do. But all the processes that I’m trying to explain now have to be broader than that. There must be disincentive so that when criminals get involved in criminal activities, they know that they will go to jail and also lose everything. They would know that whatever it is they had obtained illegally, the law is strong enough to take that away from them. And that’s where most countries are not at. So there is a whole range of measures that countries need to import into their legislations, not just simply criminalizing money laundering and financial terrorism but having the legislation that gives them the ability to deal with those tainted assets.

Capacity building must be an important factor then? What is PALP doing in regards to this?
Latu: Yes, capacity building and training is a very important aspect. We have small countries here in the Pacific where you will find, for example, the attorney generals’ offices will be staffed by a small number of people. Of course it varies from jurisdiction to jurisdiction but in a particularly small jurisdiction, you may have maybe four or five state solicitors and lawyers that deal with, not just one or two things, but a whole range of different things. This is unlike bigger countries in New Zealand, Australia, where you have attorney general’s office have specific departments that deal specifically with certain areas. In Australia, for example in the Attorney General’s office, there is a group of lawyers that deal specifically with mutual legal assistance and/or extradition issues only. We don’t have that capacity in our small countries in the Pacific. We have four or five lawyers dealing with everything. So we need to have people that specifically deal AML and CTF issues. The other problem is that there’s always a high turnover in the public sector so even when we get to training, whether it be prosecutors or law enforcement officials, they don’t hang around too long because obviously the lure of greener pastures elsewhere tend to draw them away. So we have that perennial problem of high turnover in the Pacific. But it shouldn’t stop us from providing training for law enforcement officials and prosecutors in the financial sector because there are key stakeholders and they’re the frontline in terms of the fight against money laundering and financing terrorism. So it’s very important that we do maintain on-going training for these small jurisdictions.

How much of PALP’s work consist of delivering training needs? Or are there other areas where Pacific island countries are being assisted by the programme?
Latu: I suppose I can describe our program delivery as two pronged. The first one is what we call the in-country on-site mentoring, which is a proven method of actually imparting capacity building and skills to local counterparts and unlike other donor agencies at the moment, I think we are the only ones operating in that way.
We have, as I said, our legal mentor based in Tonga, our law enforcement officer based in Vanuatu and when they go to a country, they spend up to four weeks at a time. So they just don’t go there and lecture at people and then fly out, like most consultants do.
They actually spend time on the ground and they actually show people how things ought to be done. Then they do follow up to see that it is being done properly so, you know, the concept of mentoring, when it’s applied in a very practical way, has enormous benefits for those on the ground. This is complemented by our regional training initiatives, which I had spoken about earlier.
Our training initiatives are very different in the sense that it’s very practical in its approach and we do have presentations based on, I suppose you could say, real life scenarios. We take real cases that have actually happened in the region and we use them as examples where law enforcement and prosecutors are actually trained to apply their skills. The training is very hands-on and because of the nature of the work, it has to be. It’s operational in nature.
So, it’s very practical-orientated and the skills imparted are very useful, for example we are training law enforcement officials to identify certain banking documents and its significance in tracing laundered money. You know, when you’re trying to trace the money trail, one of the areas where you’ve got to go first is the bank.
So you go to a bank, and the bank says: ‘well, I can’t give you this’, then what do you do next? We train them to then think of what the next option is. And obviously the next step is to get a search warrant. So we show them how to draft a search warrant.
When you get a bank document, well, what do you do? You get the bank document and it’s so full of numbers and figures and you say: ‘well, how do I make way of this?’ So we teach them to analyse those financial documents, which then enables them to a judgement. These, you see, are hands on practical training that you don’t give to people by lecturing.
You actually teach them on a very hands-on, practical and very operational level. That’s the kind of training we’re imparting to the officials in the region. So the regional training initiative is a very important part of our programme and we have a number of them lined up. We have one for the judges next week (May week 2, 2007) in Palau for several Forum member countries and we’re hoping to do another but then that’s mostly for jurisdictions up in the North and we’re hoping to do another one for jurisdictions further South.
It’s mainly because of the cost-benefit factors; it’s very expensive to take everybody up North so we’re basically looking at dividing up the region into one up North and one down South. But that’s for judges. Then we have a training workshop for investigators/law enforcement officials in Samoa in July. And then we have one for the prosectors in September hopefully in NZ so, and the idea is that we don’t just train them there but hopefully, we can then follow up with those particular officials after the workshops.
The regional training initiatives complements what we are doing in terms of the in-country, on-site mentoring. They go together so both methods are important in order for us to achieve our objectives.

The U.S State Bureau recently released INCSR 2007, its 24th International Narcotics Control Strategy Report (INCSR). It has obviously put four PICs on its “Jurisdiction of Concern” watch-list and is keeping a tab on nine others. How do we see ourselves in terms of that report?
Latu: Well, that’s a very interesting report. I mean obviously there are some real issues that are of concern to the U.S, that has made it list these countries in this way. All I can say is that you can’t ignore what’s in the report. I think PICs should take cognisance of what’s in the report. Perhaps, it doesn’t always have to be a negative way of looking at things. Obviously an automatic response from those countries that are monitored or listed there is being one of prime concern: ‘how come we are on the list?’ But to look at it and say: ‘OK, what does the report say? Could it be an opportunity for us to assess our own counter money laundering and terrorist financing, and see what are the weaknesses or vulnerabilities?’ The thing is there is a tendency for countries – especially after they came off the FATF blacklist a couple of years ago – to take it easy. A few Pacific island countries came up on that list, including some who are now listed by the US. As soon as they came off, everyone breathed a sigh of relief and did nothing any more. They felt everything was OK. But you know, money-launderers don’t stay in the same place. They are very creative, inventive criminal minds and they are going to come up with new ideas, new techniques to launder money, to finance terrorism so, whatever we have in place right now may not be enough to deal with that problem next year or in years to come. So our anti money laundering system and counter terrorist financing regimes have to evolve, they have to change. They cannot stay in the same place. Otherwise they’re going to be left behind. And that I think is something that PICs have got to be aware of. Just because your legislation was in tune two years ago, doesn’t mean it’s going to be fine next year. We have to keep up with international standards.

When will PALP be fully staffed?
Latu: Well, we’ve been trying to recruit a regulatory expert and an expert in the financial sector and then hopefully by the end of the year, we’ll have another law enforcement expert up North. But we are not waiting for the full complement of our staff. We are still forging ahead and we’re doing work with whatever resources we have on hand.

What about funding support. Are you happy with it or do you need more or are you going to get more?
Latu: All I can say at this stage is that this programme is for four years. We have confirmed funding for two and we’re working on funding for the whole four year period so it’s useful to know if you have the funding for the whole four years but at this point, we don’t want to let that hold us back. We just want to get on with our work and do it.

So what happens after four years, when the program expires?
Latu: We may review after four years. It’s up to the Pacific Islands Forum Secretariat and the donor (U.S State Department) to decide what they want to do. I can’t really say at this point. It could be extended. The important factor is the focus of the program. So it’s premature to say what’s going to happen at the end of four years.

Finally you were talking about other countries coming on line to use your assistance in their AML/CTF legislations. What are some of these countries?
Latu: We have Tonga, Vanuatu, Palau and Republic of Marshall Islands. We are awaiting further information from Fiji and Cook Islands, Samoa and the Solomon Islands. We have discussed a number of areas where we could possibly provide some assistance. You know, they are open to the idea and there are other donors also offering assistance so, it’s a matter of coordinating between the donors. It is these countries to come back to us and say they want us to help. There are specific countries that we’ve identified in terms of certain areas where legislations could be improved. We’re trying to make contact with them in the next couple of weeks and if there is a positive response, then we’re hoping we’ll expand our programme of assistance to them as well.
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NOTE: This is the original transcript of this interview, published in the Islands Business Magazine as: Q&A KOSI LATU, COORDINATOR PACIFIC ANTI-MONEY LAUNDERING PROJECT. EFFECTIVE LEGISLATION TO COUNTER MONEY LAUNDERING, pp 40,41, JULY 2007 edition.

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