Effective supervision of HOSSPs is one of the primary challenges facing regulators. This section discusses the survey results on the supervision of hawala and other similar service providers, sanctions applicable to regulated hawala and other similar service providers for failure to implement AML/CFT obligations and requirement on foreign counterparties with respect to money transfers.
3.5.1 SUPERVISION OF REGULATED HAWALA AND OTHER SIMILAR SERVICE PROVIDERS
Five countries responded that they have a separate examination approach and teams for regulated hawala and other similar service providers while six14 countries did not have such a separate approach, as shown in Figure 3.3. It is not clear whether the separate examination team is only for hawala and other similar service providers or it is for general remittance companies, money service providers, or payment institutions, among others.
In the case of Australia, within the FIU, there is a centralised team that focuses on remittance service providers.
14 Only 11 out of 15 surveyed countries where hawala and other similar service providers are legal
provided the information.
100% 100% 93% 86% 86% 79% 79% 0% 20% 40% 60% 80% 100% CDD ID Verification STR Record Keeping Training Compliance Officer Internal Controls % of countries
2013 51
Figure 3.3 Separate Team to Examine Regulated Hawala and Other Similar Service Providers (percentage of countries)
Source: FATF project questionnaire.
3.5.2 SURVEY RESULTS: REGULATORY AND SUPERVISORY AUTHORITIES
In developing countries, the Central Bank is most of the time the supervisory authority for HOSSPs, while there is more diversity in the case of developed countries. Except for one country, the same agency is responsible both for regulation and supervision of the legal hawala and other similar service providers. Though the sample size is small, there are essentially four different institutional arrangements for the regulation and supervision of legal HOSSPs:
1. Central Bank
2. Financial Supervisory Authority (FSA) 3. Financial Intelligence Unit (FIU)
4. Others like Excise and Customs department, Department of Internal Affairs
Having the central Bank as the regulator and supervisor is the most common model in developing countries, as the Central Bank is the default supervisor for the whole financial market in addition to being one of the most established state agencies in these countries.15
The most common regulator and supervisor in developed countries is the Financial Supervisory Authority. In the case of Germany, Norway and Sweden, this authority is the sole regulator and supervisor for the legal HOSSPs. In the UK, the FCA (Financial Conduct Authority) regulates and supervises in cooperation with another authority, “H M Revenue and Customs”.
In several countries, the FIU has been designated as the AML/CFT regulator and supervisor of legal hawala and other similar service providers – for instance Canada and United States. In the U.S., the FIU has delegated examination of HOSSPs to their tax authority. In Australia, all the AML/CFT supervision including those of hawala and other similar service providers is undertaken by the Australian Transaction Reports and Analysis Centre (AUSTRAC), Australian FIU.
All these various arrangements are outlined in Table 3.4.
15 See Todoroki, Noor, Celik, Kulathunga (2013).
45% 55% 0% 20% 40% 60% Yes No % of c ount ri es
52 2013
Table 3.4 AML/CFT Regulatory and Supervisory Authorities in Surveyed Countries
Countries Regulatory Authority Supervisory Authority
Australia AUSTRAC (Australia’s AML/CTF
regulator and FIU)
AUSTRAC (Australia’s AML/CTF regulator and FIU)
Germany BaFin (Financial Services Authority) BaFin (Financial Services Authority)
Republic of Guinea Central Bank Central Bank
Norway Finanstilsynet (The Financial
Supervisory Authority of Norway, FSA)
Finanstilsynet (The Financial
Supervisory Authority of Norway, FSA)
Lebanon Central Bank Central Bank
Hong Kong Customs and Excise Department Customs and Excise Department
Slovenia Central Bank Central Bank, Office for money
laundering Prevention
Netherlands Central Bank Central Bank
Sweden Finansinspektionen (The Swedish
Financial Supervisory Authority)
Finansinspektionen (The Swedish Financial Supervisory Authority)
New Zealand Department of Internal Affairs Central Bank
Indonesia Central Bank Central Bank
UK HM Revenue and Customs, Financial
Services Authority
HM Revenue and Customs, Financial Conduct Authority
US FIU FIU (HOSSPs examinations delegated
to tax authority)
Canada FIU FIU
Source: FATF project questionnaire.
3.5.3 SANCTIONS APPLICABLE TO REGULATED HAWALA AND OTHER SIMILAR SERVICE
PROVIDERS FOR FAILURE TO IMPLEMENT AML/CFT REQUIREMENTS
Survey results (Figure 3.4) highlight the range of compliance issues that can lead to sanctions applied to regulated hawala and other similar service providers (failure to register/become licensed; failure to comply with AML/CFT obligations such as CDD, STR, record keeping, training, compliance officer and internal control program) and the percentage of surveyed countries having such sanctions available.
2013 53
Figure 3.4 Sanctions for Failure to Implement AML/CFT Obligations (percentage of countries)
Source: FATF project questionnaire.
Note: Hawala and other similar service providers are legal in 15 countries. Out of 12 FATF member
countries where Hawala and other similar service providers are legal, 11 countries provided the data. This question was not included in the abbreviated APG questionnaire, therefore, no response from APG member countries.
As hawala and other similar service providers are treated the same as any other remittance companies for the purpose of AML/CFT obligations, sanctions applicable to hawala and other similar service providers for failure to implement AML/CFT requirements are general provisions that apply to all MVTS whether they are called remittance companies, money service providers, or payment institutions. The questionnaire did not specifically ask whether sanctions are the same for all the financial institutions including MVTS or not, but some countries impose the same range and scale of sanctions for all the financial institutions while others have different scale and range of sanctions depending on types of financial institutions (for example, there are differences between banks and MVTS).
Though sanctions are applicable for failure to implement AML/CFT requirements in most of the countries, survey data pointed out that actual enforcement cases where sanctions were imposed against hawala and other similar service providers have been very few in most of the countries in the last five years.
3.5.4 REQUIREMENTS ON FOREIGN COUNTERPARTIES
Twenty one surveyed countries answered the question whether money transmitters in their countries can only deal with registered/licensed money transmitters in the ultimate recipient country and only eight out of these twenty one impose such a requirement (Figure 3.5).
100% 100% 91% 91% 82% 73% 73% 0% 20% 40% 60% 80% 100% Failure to register CDD STR Record Keeping Training Compliance Officer Internal Control Program % of countries
54 2013
Figure 3.5 Requirement to Deal only with Regulated Money Transmitter in Ultimate Recipient Country (percentage of countries)
Source: FATF project questionnaire.
Note: Out of 25 FATF member countries, 21 responded to this question. This question was not
included in the abbreviated APG questionnaire, therefore, no response from APG member countries.
Only three out of the 1616 countries that responded to the question whether “it is a requirement in their country that funds should be sent directly to the pay-out countries by the originating money transmitter.” answered positively (Figure 3.6).
Figure 3.6 Requirement to Send Funds Directly to Pay-Out Country by Originating Money Transmitter (percentage of countries)
Source: FATF project questionnaire.
This would suggest that further discussion of Recommendation 13 in the context of money transmitters would be useful, in particular whether countries should interpret R13 to require that money transmitters, including hawala and other similar service providers, should only deal with licensed or registered foreign counterparties.