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Project Code and Sector
Project Background and Justification
Immediate Objective, Outputs and Main Activities

AD/RAS/02/G44 - UNODC Participation in the ASEM Anti-Money Laundering project

1. Project Code and Sector

No. and Title: AD/RAS/02/G44 - UNODC Participation in the ASEM Anti-Money Laundering project
Status/Starting Date: July 2002
Project Function: Money Laundering
Duration: 3 years
Executing Agency: UNODC
Aggregate Budget & Funding Source: GBP 806,000 (approx US$ 1,185,300)
United Kingdom

 

2. Project Background and Justification

The project entails UNODC participation in the ASEM (Asia-Europe Meeting) Anti-Money Laundering Project, which is aimed at developing sustainable institutional capacity in the Asia region to address money laundering concerns at a national, regional and international level. UNODC will provide technical experts and consultants, undertake pre-workshop preparatory work, administrative, logistical and support services to the organization and delivery of workshops/seminars, and assist DFID in the monitoring and evaluation of the ASEM Anti-Money Laundering . The ASEM Money Laundering project intends to develop closer and deeper cooperation between Europe and Asia as part of international efforts to implement a global anti-money laundering network; to strengthen existing institutional capacity at the regional level; and to develop new, or enhance existing institutional capacity at the national level.

Background

The fight against organised crime is one of the major issues facing the world as it enters the 21st Century. One of the central issues in combating organised crime relates to the methods by which the production and trafficking in illicit drugs leads to the amassing of huge illicit profits.

A key element therefore in disrupting organised crime is the active global prevention of money laundering. Money laundering is essential to any criminal enterprise because it enables criminals to remove or distance themselves from a criminal activity generating the profits thus making it more difficult to prosecute key organisers, to confiscate the assets of those criminals and to allow them to enjoy the benefits of their crimes without bringing attention to themselves. In addition these profits are reinvested in further criminal activity or in legitimate business.

The recognition of the international element of money laundering and its role in underpinning organised crime has led to the need for a harmonised international response to produce a truly global response. That need has, in turn, given rise to a series of international initiatives over the past ten years, including the creation of the Financial Action Task Force (FATF) and the development of global standards for fighting money laundering (the FATF 40 Recommendations), the introduction of mutual evaluation procedures and sharing of information on criminal activities.

The need for a global approach to tackling money laundering was recognised at the United Nations General Assembly Special Session on International cooperation to combat illicit drugs and drug trafficking of 8-10 June 1998, and at the G8 Summit of May 1998, the European Union clearly indicated the priority it places on creating a global partnership of nations committed to the effective implementation of anti-money laundering measures and more specifically, the 40 Recommendations of FATF to which the EC is a full member. This commitment is reflected in the preamble and in article 3 of the EC regulation adopted by the Council on 21 October 1997 on cooperation with third countries in the fight against illicit drugs, and is manifested in the willingness of the EU to cooperate with other regional groupings and with developing countries in this effort.

This approach was further backed at the ASEM II Summit of Heads of State and Governments in London (3-4 April 1998). Member States and Institutions demonstrated their willingness to strengthen the cooperation against money laundering. The European Commission is a full member of ASEM; the other members being the EU Member States and China, Korea, Japan, Brunei, Indonesia, Singapore, Philippines, Thailand, Vietnam, and Malaysia.

The ASEM II Chairman's Statement states that (paragraph 17) "Leaders agreed that addressing the issue of money laundering will contribute to transparency of the financial system and to efforts to combat drug trafficking and organised crime by attacking criminal assets. The development of policies against money laundering has been helped by the FATF's 40 Recommendations which are now an internationally accepted standard. They looked forward to enhanced cooperation between Europe and Asia in this area, including exchanges of experts and a joint study on organised crime's links with Asian and Western financial markets. They asked Finance Ministers to encourage cooperation and review progress at their next meeting. "

The ASEM Finance Ministers Meeting in Frankfurt in January 1999 called for progress on a project to meet the terms of the above statement. The ASEM Project is the outcome of this meeting. It recognises the breadth and complexity of the areas that need to be addressed, and proposes a number of interlocking strategies, including the establishment of a multi-disciplinary technical assistance and training programme.

JUSTIFICATION

Money laundering situation/General situation

Money laundering is the means by which the origins of the proceeds of crimes are obscured. This means that the criminals' operating capital is preserved, and the illegal profit can be enjoyed with impunity by those who are at the heart of the operations. Moreover, the origins of criminally derived capital can be obscured far more effectively if the money is laundered through numerous jurisdictions. The difficulties for those attempting to combat money laundering are increased infinitely when transactions involve countries with less stringent anti money laundering standards.

Moreover, there is increasing evidence that sophisticated criminal groups are prepared to cooperate with each other where both have an opportunity to increase profitability by doing so. The complementarity of the activities of drug production and export in the Asian region' and drug consumption and import in the European region would suggest that here such an opportunity exists. Asset tracking provides the most reliable way to determine the links between all relevant parts of large international criminal operations, and an effective coordinated asset tracking strategy should be an international priority.

While the existence of an effective coordinated strategy is of the utmost importance, it is difficult to develop such a strategy when the particular situation in and problems faced by the areas being dealt with are not understood. Thus, the most efficient way to proceed is for nations to first adopt effective national measures to combat money laundering and then to cooperate both globally and regionally, in putting effective anti money laundering legislation in place, and in sharing information.

In addition, jurisdictions lacking the stringent anti money laundering measures implemented elsewhere will suffer increasingly from the economic instability induced by criminals' increased use of their vulnerable financial systems. It is therefore also the case that the spread of effective anti money laundering strategy not only aids the fight against organised crime, but also aids in the search for economic stability. Given the interdependence of economies, this is of benefit to all jurisdictions.

It is also the case that a system's vulnerability to corruption is increased when a more effective attack is being launched elsewhere. Therefore, even if money laundering is discouraged in some countries, it and the criminal activity from which it is derived will survive by moving its epicentre and using other jurisdictions. These facts lead to the conclusions that:

it is necessary to ensure that effective anti money laundering measures are in force in all jurisdictions; and
unilateral or even bilateral action can only ever be of limited use.

Money Laundering in Asia

Not only is there a significant difference in the state of development of the economies and financial sectors in the countries of the Asia region, but also in the legal systems in place in those countries.

Although policy commitment has enabled anti-money laundering laws to be enacted in a number of jurisdictions and there also has been steady progress with other aspects of formal compliance, some important gaps remain. Legislation alone is insufficient, and it is clear that many jurisdictions simply do not have the expertise to move forward to the implementation stage.

Currently, there is a diverse range of anti money laundering activities occurring within and between Asian countries. Some countries were still expected to ratify the 1988 UN Convention (Thailand, Indonesia, and Singapore); not all of them have adopted legislation to address money laundering problems and bank secrecy nor set up adequate structures to ensure reporting of suspicious transactions (Brunei has no legislation, the Philippines is in the process of adopting new legislation, Malaysia and Indonesia had no legislation until 1996, Chinese regulations need to be updated, and Hong Kong is in the process of addressing the problem of non banking institutions).

Some jurisdictions require assistance in the drafting of anti money laundering legislation. The existence of such legislation alone is not sufficient to ensure an effective strategy. Implementation can pose problems. This problem can begin to be alleviated through:
in the financial area, the provision of advice on money laundering regulations and guidance notes; and
in the law enforcement area, establishment where feasible, or strengthening of Financial Investigation units.
It is not always the case that jurisdictions will be sufficiently informed about the money laundering problem to be able to identify their own training and assistance needs. This problem therefore requires some form of study into these jurisdictions' needs before further progress can be made.

Expected end of project situation

By the end of the project, UNODC has efficiently and effectively provided all the services envisaged in the present project, which enables the ASEM Project to produce the following measurable results.

Ratification where possible and progress towards the ratification (where political difficulties could prevent ratification but political commitment of the government exists for ratification) of the UN Convention against Illicit Trafficking in Narcotic Drugs and Psychotropic Substances of 1988.
Political commitment and concrete demonstration of implementation of UNGASS declaration (the deadline set by the General Assembly is 2003).
Effective training and where possible equipment by national governments to strengthen anti-money laundering systems, including to those agencies engaged in implementing national strategies and cooperating regionally and internationally.
Adoption of legal and judicial instruments (including modern all-crimes money laundering and international cooperation legislation) established or strengthened, to enable effective action to be taken against money launderers.
Raised level of awareness by the financial sectors in ASEM countries or particular money laundering problems, and increased cooperation between financial institutions and regulators/law enforcement agencies.
Action plan identifying ways Asian and European countries can cooperate to disrupt the activities of organised criminal organisations operating in both Europe and Asia, and to keep abreast of methods used by such organisations to exploit weaknesses in existing national anti-money laundering systems.
Reasons for UNODC involvement

The UNODC Regional Centre for East Asia and the Pacific ("The Centre") is based in Thailand and is mandated with drug control and international crime prevention work in 30 countries. The Regional Centre is acknowledged as the lead catalyst, coordinating agency, focal point and regional resource on all drug control and related issues in the region since the 1970's. It facilitates policy development, capacity building, drug control and crime prevention work through:

strengthening the capacity of government agencies and civil society institutions by implementing regional and national projects that build upon best practices as well as effective monitoring of drug control and transnational crime developments;
facilitating cooperation among countries of the region to control production, trafficking and abuse of illicit drugs and drug related crime and corruption by strengthening international, regional and bilateral collaboration and assisting with development and implementation of joint policies, strategies, and programmes and in particular, through a Subregional Action Plan;
serving as an advocate for a drug resistant East Asia and the Pacific region by promoting public and political awareness through media and the civil society as a whole.
In addition, the Global Programme Against Money Laundering is operating since 1997 to provide technical services to UN Member States. It also acts as a focal point for substantive issues related to money laundering within the UN system.

UNODC carries out its drug control and crime prevention mandate in accordance with several treaties

UNODC has been active in promoting subregional cooperation on drug control and bringing together the Greater Mekong countries and the ASEAN countries, as follows:

A Memorandum of Understanding (MOU) on drug control in the Greater Mekong countries (1993):

The MOU serves as the framework for cross-border and sub-regional collaboration on drug control and related crime prevention needs between the six signatory Mekong countries and UNODC. The MOU countries meet annually to review progress on joint programmes; discuss emergent developments; prioritize needs and agree on proposals for action.
A Sub-Regional Action Plan:
In order to address emergent drug control and related needs as identified and collectively agreed by the MOU countries above, the Centre facilitates project formulation, funding submission and brokers project funding under a "sub-regional action plan". The Centre manages a portfolio of funded projects. There are at least 14 active regional projects valued at over USD 30 million and on an average of 5 regional pipeline initiatives in the portfolio at any given point in time. 80% of the Centre's projects under the responsibility of the Centre in the sub-regional action plan portfolio are law enforcement and related capacity building projects (see Section Annex A1).

The ASEAN +China Cooperative Operations in Response to Dangerous Drugs

ACCORD Action Plan:
Building on the effectiveness of the sub-regional drug control cooperation in six Mekong countries above and in responding to the call for "a drug free ASEAN by 2015", the Centre organized and co-hosted with Thailand an international congress called, "In pursuit of a drug free ASEAN 2015, sharing the vision, leading the change" in Bangkok in October, 2000. As its outcome, an action plan embodying highest political commitment emerged which is called "ACCORD Plus". One of the four pillars of this plan reads as follows, "establishing the rule of law by an enhanced network of control measures, law enforcement cooperation and modern legislation". The action plan is endorsed by all participating countries adopting specific action with respect to money laundering as follows:

"Participating countries will facilitate all appropriate cooperation to draft, approve and or improve legislation against money laundering as suggested by the Asia Pacific Group on Money Laundering. At least 30% of all countries will have a functioning agency to control money laundering by the Year 2004 and all by the Year 2008.

UNODC and ASEAN will provide technical assistance to achieve these results".

Implementation arrangements

The present project will be implemented by UNODC through its Centre in Bangkok, Thailand, as agreed upon in the Memorandum of Understanding (MOU) between the Government of the United Kingdom of Great Britain and Northern Ireland and UNODC, subject to United Nations rules and regulations and UNODC mandates.

An UNODC Project Coordinator will be appointed to coordinate, develop and implement the services envisaged in the present project under the direct supervision of the Centre's Regional Law Enforcement Adviser. The Project Coordinator will be supported by a Project Assistant.

The DFID Technical Adviser of the ASEM Project will be the Head of Asia Pacific Group on Money Laundering based in Sydney, who is responsible for the achievements of the objectives of the ASEM Project.

The responsibilities of the Technical Adviser would be to prepare, and support the implementation of activities to deliver the project objectives. Specifically the Adviser would:

arrange for the Phase 1 needs analysis;
taking account of the needs analysis and within the agreed framework of the MOU, assist to draw up detailed objectives, budgets and time-bound, costed work plans for endorsement by the steering group
identify sources of expertise relevant to the identified requirements;
Assist and supervise the implementation of activities in cooperation with regional governments;
Prepare and submit reports on activities and results.
Liaise as necessary with regional and EU governments and with other relevant organisations (including FATF) in relation to the project and money-laundering activities.

Overall objective

The present project will contribute to the main objective of the ASEM Anti-Money Laundering Project: to develop sustainable capacity in the Asia region to address money laundering at a national, regional and international level.

 

3. Immediate Objective, Outputs and Main Activities

A. Immediate Objectives:
To participate in the implementation of the ASEM Money Laundering Project and in doing so to contribute to the development of closer and deeper cooperation between Europe and Asia as part of international efforts to implement the global anti-money laundering network.

B. Outputs and Related Activities
Output 1: Needs assessment regarding technical assistance in establishing and/or improving an anti-money laundering regime, in Asian ASEM jurisdictions (10 countries).

Related Activities:
1. Assist the DFID Technical Adviser (TA) with the identification of potential candidates for the needs assessment exercise (country advisers and Technical Expert) in 10 target countries.

2. Assist the TA with technical coordination of the needs assessment.

3. Assist with the selection and recruitment of Country Advisers.

4. Manage all travel, accommodation related allowances and expenses for Country Advisers and Technical Experts.

5. Assist the TA with distribution of papers and reports to the countries concerned.

Output 2: Three annual anti-money laundering method workshops, including typologies of proceeds of crime and terrorist financing.

Related Activities:
1. Assist the TA on the selection and recruitment of the Team Leader.

2. Selection and recruitment of a research officer and temporary secretarial staff to support the Team Leader.

3. Organize and provide all administrative, logistical and support services to the workshops.

Output 3: Two research papers on (i) cash based and parallel economies, and (ii) database on case studies.

Related Activities:
1. Assist the TA on the selection and recruitment of the Coordinator/research consultant.

2. Provide to the consultant office, secretarial assistance and communication support.

Output 4: Mission to Offshore Financial Centres. Workshop/ seminar attended by officials from offshore financial centres in the region.

Related Activities:
1. Assist the TA on the selection and recruitment of the two Technical Advisers.

2. Provide the Offshore Financial Centres' Technical Advisers with related office, secretarial services and communication support.

3. Provide all administrative, logistical and support services needed for the delivery of the Offshore Financial Centres' workshop/seminar.

Output 5: Training and Technical Assistance Programmes and Seminars to ASEM Asian Jurisdictions focussing on regulators, law enforcement officers and administrators working in key units handling, judicial cooperation, exchange of intelligence and processing of suspicious transactions related to money laundering.

Related Activities:
1. Select and recruit 3 Technical Assistance/Training experts.

2. Provide administrative support to the 3 Technical Assistance/Training experts.

3. Photocopying and distribution of related training material developed DFID.

C. Inputs
Government inputs - Thailand will provide office space free of charge for the project at the Anti Money Laundering Office (AMLO) in Bangkok.

UNODC inputs - UNODC will establish a project office located at the AMLO in Bangkok.

A full time administrative and secretarial support staff for the project will be hired. This staff will provide day to day support to the Project Coordinator and the Centre in Bangkok for the project. This is a local hire position on Special Service Agreement.

UNODC will arrange for a full time Project Coordinator. A professional with relevant university degree and law enforcement project coordination experience in the region is identified for the position. The Project Coordinator will work under the direct supervision of and report to Centre's Law Enforcement Adviser.
Given the physical distance between UNODC and the AMLO locations, there will be a need for hot link between the project office at the AMLO and UNODC at the UN Building. UNODC and all of its facilities to support the project such as computer network, finance, banking, telecommunications, travel, visa and document production are housed in the UN Building.

UNODC will establish at the Centre in Bangkok an internal project oversight and technical backstopping team. Headed by the Law Enforcement Adviser, the Team will meet at least once in every other month to review the project status and to resolve outstanding issues. The Project Coordinator will consult the Law Enforcement Adviser on a regular basis. The Law Enforcement Adviser and the Project Coordinator will have weekly review meeting either at the AMLO or at the Centre. Also, the Law Enforcement Adviser and the Project Coordinator will consult, meet and review the project with their AMLO counterparts routinely and as necessary. The Law Enforcement Adviser and the Project Coordinator at the Centre will receive direction and clarification from the Technical Adviser, consult and brief him on the project closely, routinely and on demand. This will be accomplished via a combination of hot link, written communication and periodic review meetings.

Project activity 1: Needs Assessment for Asian ASEM Jurisdictions (Phase I):

In preparation, UNODC will assist the Technical Adviser with identification of suitably qualified potential candidates for the exercise in 10 target countries and its technical coordination. Upon receiving the Terms of Reference and related details from the Technical Adviser, UNODC will assist the Technical Adviser with selection of the Country Advisers and the Technical Expert. The Centre will arrange for short term Special Service Agreement to the candidates selected by Technical Adviser and in compliance with DFID requirements and the conditions set in the MOU. Also, a temporary secretarial staff to support the Technical Expert/ Coordinator will be hired by UNODC.

As per the Terms of Reference, the Centre will organize and manage all travel, accommodation, related allowances and expenses for the Technical Expert/ Coordinator to visit 6 of the 10 targeted countries. Given the importance of this exercise to the project, UNODC recommends participation of the Technical Adviser in one of the missions.

UNODC will assist the Technical Adviser with the production and distribution of project papers and reports.

Project activity 2: First Annual Money Laundering Methods Workshop (Phase I):

UNODC will arrange for the issuance of short term Special Service Agreement to the Team Leader selected by the Technical Adviser and in compliance with DFID requirements and the conditions set in the MOU. Also, UNODC will arrange for the recruitment of a Research Officer and a temporary secretarial staff to support the Team Leader.

UNODC proposes to hold the first Workshop in Bangkok, Thailand.

UNODC will hold it following the Needs Assessment and preferably, in the last week of Phase One of the project.

However, UNODC will undertake all pre-workshop preparatory work in a manner leading to its delivery as per the time schedule agreed to by the Technical Adviser.

In pursuance to the Terms of Reference, UNODC will organize and provide all related administrative, logistical and support services to the project workshop. This include office and support to the workshop team, invitation to the sponsored participants, their travel, tickets, accommodation and subsistence allowances; rental of workshop venue and equipment; catering services during the workshop; workshop stationery; related materials copying; reports production and their distribution.

Project activity 3: Research paper 1: Cash Based and Parallel Economics (Phase II):

Upon receiving the Terms of Reference, UNODC will arrange for the engagement of Coordinator/ Author identified by the Technical Adviser. UNODC will provide to the Research Coordinator/ Author with related office, secretarial assistance and communication support. UNODC will arrange for travel, tickets, accommodation, fees and allowance payment as well as production and distribution of related materials and reports as per the Terms of Reference.

Project activity 4: Mission to Offshore Financial Centres (Phase II):

Upon receiving the Terms of Reference, UNODC will arrange for the engagement of the two Technical Advisers (OFCs) identified by the Technical Adviser. UNODC will provide to the OFCs Technical Advisers with related office, secretarial assistance and communication support.

The Technical Adviser will nominate the seminar/workshop venue.

However, UNODC will undertake all pre-workshop preparatory work in a manner leading to its delivery as per the time schedule agreed to by the Technical Adviser.

UNODC will provide to the project all related administrative, logistical and support services leading to the organization and delivery of the OFCs workshop/seminar. This include office and support to the workshop team, invitation to the sponsored representatives, their travel, tickets, accommodation and subsistence allowances; rental of workshop venue and equipment; catering services during the workshop; workshop stationary and related materials copying and reports production and their distribution. UNODC will organize and provide all related administrative, logistical and support services to the OFCs mission.

Project activity 4: Generic Technical Assistance/ Training Module to be provided to each Asian ASEM jurisdiction (variously covering legal, financial and law enforcement sectors) (Phase II):

Upon receiving the Terms of Reference, UNODC will arrange for the engagement of the three Technical Assistance/ Training experts identified by the Technical Adviser. UNODC will provide to the Technical Assistance/ Training experts with related office, secretarial assistance and communication support. UNODC will arrange for travel, tickets, accommodation, fees and allowance payment for the training exerts as well as production and distribution of related training materials and reports.

Project activity 5: Second Annual Money Laundering Methods Workshop (Phase II):

UNODC, building on lessons from the first workshop, will provide fine tuned organization and logistical support services to the project in organizing the second Annual Money Laundering Methods Workshop. Please see Project Activity 2 above for a description of management services which are not repeated here.

The Technical Adviser will nominate the seminar/workshop venue.

Project activity 6: Research Paper 2 (including establishment of database of case studies on money Laundering (Phse II):

UNODC, building on lessons from First Research Paper project, will provide fine tuned organization and logistical support services to the project in organizing and delivering the Research Paper 2 project as per the specific Terms of Reference from the Technical Adviser. Please see Project Activity 3 above for a description of management services which are not repeated here.

Project activity 7: Final evaluation of the project (Phase III):

UNODC will assist the Technical Adviser with monitoring and evaluation report of the project at the completion of each phase/ stage of the project and at the completion of each activity/ component under Phase II.

With reference to the "final evaluation report", UNODC understands this to be an important exercise for the ASEM project which will require an external evaluator and related additional resources to be provided by DFID. In anticipation, UNODC proposes to assist the project and the Technical Adviser with logistical and support services leading to the organization and delivery of the evaluation exercise.

Project activity 8: Third and Final Money Laundering Methods Workshop (Phase III):

UNODC will undertake and deliver all administrative, logistical and support services to the project in delivering the Third and Final Money Laundering Workshop.

The Technical Adviser will nominate the seminar/workshop venue.

UNODC will negotiate and administer consultant contract strictly in accordance with the Terms of Reference and the scope of work as received from the Technical Adviser. UNODC will support the consultant and consultant's work in accordance with the Terms of Reference, contractual conditions, agreed upon work schedules and the approved budget.

UNODC will provide the project with replacement staff and additional staff when needed. Also, UNODC will call on and deploy additional resources on short notice as necessary, when needed and as directed by the Technical Adviser.

UNODC will work in close coordination and communication with the Technical Adviser. UNODC will undertake and facilitate all coordination and support activities to this end.

UNODC will provide written narrative and financial reports in an agreed upon format to DFID at six monthly intervals with a copy to the Technical Adviser. UNODC, upon request from DFID and on as and when needed basis, will provide additional reports either to DFID or through DFID to the Steering Group of the ASEM project

For quality assurance UNODC will internally monitor and supervise the project. The Centre's Law Enforcement Adviser will provide the technical oversight.