Advisory services: Financial Transparency Advisors

The business of anti-money laundering and countering the financing of terrorism and proliferation (AML/CFT/CFP), is a hard, often thankless task. Data is patchy, resources scarce and expertise in how to build a robust framework hard to come by. Failure is punished and success tends to go unnoticed. Jurisdictions facing assessment by the Financial Action Task Force – or trying to avoid the FATF’s ‘grey’ and ‘black’ lists – are often unsure where to begin. Translating high-level and oftentimes abstract policy instructions into concrete operational steps and measures can be a challenging task.

Gabriele Dunker, the founding partner of Financial Transparency Advisors, recognised these challenges and formed the advisory firm to help countries meet them. She and FTA’s other partner, Michael Stellini, both previously worked in international organisations and have conducted many AML/CFT assessments, so know what is required – how to ‘speak the same language’ as the FATF. “All of our trusted consultants were part of the FATF circuit and took part in international policy discussions. At the same time, they all have extensive operational experience in AML/CFT relevant areas,” says Dunker. “It is this combination that makes our advisors so uniquely positioned to assist countries.”

Dunker speaks animatedly about helping officials move from a state of uncertainty and even alarm at impending censure from the FATF, to an understanding of what needs to change, and then action to implement improvements.

Clients speak of the FTA team’s professionalism, but also the bond that develops between consultants and clients. FTA is a highly specialised team and deeply involved with every aspect of the process of overhauling an AML/CFT framework, part remotely and part on the ground in the jurisdiction. “It’s the caring bit we are told is one-of-a-kind,” says Stellini. “We do have sleepless nights over the outcome. We get into the boat with the client. We sink or float together.”

On starting a new project, FTA’s consultants will conduct a review of current AML/CFT processes. Often, they find AML/CFT is not given sufficient priority, perhaps embedded within prudential functions rather than treated separately.

Next, the firm reviews and strengthens risk assessment mechanisms. This often brings into play FTA’s sister company Financial Transparency Solutions, developer of the Strix risk data system. Strix allows supervisors to collect and analyse AML/CFT data to construct risk profiles and scores. The United Arab Emirates is one jurisdiction that has deployed Strix.

With better data on where risks lie, supervisors can begin to move towards a risk-based framework, allocating resources to the areas that need them most. For example, resource-intensive operations such as on-site inspections are targeted at the highest-risk firms.

Many of the jurisdictions that work with FTA are international financial hubs, which often see large volumes of cross-border financial flows, often involving politically exposed persons. A risk-based approach is critical for such jurisdictions to make best use of scarce resources.

“The biggest challenge is to get supervisors and other competent authorities to have adequate insights into sectorial and institutional risks, so they can decide where their focus and resources need to go,” says Dunker. “Developing this risk understanding and moving it into the centre of countries’ operations is currently one of the highest priority.”

In a fourth step, FTA reviews, adjusts and strengthens the jurisdiction’s supervisory tools for AML/CFT. These range from supervisory manuals to on-site inspection documents, report templates and guidance documents.

The final step is training and capacity building. Clients not only need to implement changes to the framework, but ultimately to sustain their AML/CFT supervision over the long term.

FTA has been working with a client in the Middle East and North Africa (Mena) region for three years now, preparing for an FATF ‘mutual evaluation’. Ahead of the evaluation, a jurisdiction needs to prepare hundreds of pages of documents on the AML/CFT framework, so having deeply embedded expertise is critical. FTA has helped the authorities establish AML/CFT as a standalone function with the necessary resources.

“Anyone involved in the system here would feel the improvement,” says an official from the country. “We are very much in a better position now.”

A client from a government agency in a financial centre that has worked with FTA in the past year says the firm carried out comprehensive analysis before setting well over 100 goals. The jurisdiction is now making significant progress towards achieving these, substantially boosting preparedness ahead of an AML/CFT assessment later in 2023. The client says it was particularly helpful to have an outside party give a clear idea of what was required – a process that was “eye-opening” for many local officials.

Both these jurisdictions have assessments ahead of them, and the outcomes remain uncertain, though FTA’s consultants are optimistic. The firm has shepherded past clients successfully through the FATF mutual evaluation process, including G7 and G20 countries.

“AML/CFT evaluations are a lot of stress and pressure for countries, much is at stake for our clients,” says Jan Bellenghi, an advisor at FTA. “We stick to very tight timelines and manage to make a lot happen.”

FTA is a highly specialised firm, with two partners and around 15 staff covering a global client base. Despite the boutique setup, they punch above their weight, often out-competing large consultancies because they can draw on deep expertise from within the industry and show a strong commitment to project outcomes. Indeed, clients highlight the flexibility of the FTA team, something Dunker underlines as well. She says being able to draw on reliable and internationally recognised external advisers allows the firm to tailor its approach to each jurisdiction’s particular needs.

The official from the Mena region says the FTA consultants were highly responsive and even went beyond the scope of the project to help when needed, displaying a “deep and detailed understanding” of the issues. “They became part of our team,” he says. “We dealt with them not only as consultants, but also became friends.”

The Central Banking Awards 2023 were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Joasia Popowicz, Ben Margulies, Riley Steward, Jimmy Choi and Blake Evans-Pritchard