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28 March 2024

IMF urges Qatar to strengthen financial intelligence unit

Qatar now has the second-most developed financial sector in the region. (AFP)

Published
By Nadim Kawach

The International Monetary Fund (IMF) on Sunday commended Qatar for having one of the lowest crime rates but said its anti-money laundering law needs to be improved because it suffers from loopholes.

In a 241-page report on the Gulf country's anti-laundering regulations, the IMF said it did not see any significant financial criminal activity in Qatar although it now has the second-most developed financial sector in the region after the UAE.

The study, conducted by an IMF team following a series of meetings with authorities during a visit to Qatar in June, also called for the development of the country's financial intelligence unit to ensure it has more powers.

In a response to the team findings, the Qatari Government said it was pleased to be informed that Qatar has a low crime rate but stressed it was aware of the risks associated with the rapid development of its banking sector. It also said it was already taking measures to upgrade its anti-laundering laws.

According to the IMF assessment team, the anti-money laundering law (AML) in Qatar provides for the basic elements of the money laundering offense but still suffers from major shortcomings, in particular with respect to the limited number of predicate offences. It said the law does not enable the Qatari authorities to prosecute money laundering in a fully effective way.

"There is a need to amend the AML to clarify and extend the scope of the money laundering offence in order to cover all intentional acts aiming to conceal or disguise not only the source of the funds but also the true nature, location, disposition, movement or ownership of or rights with respect to proceeds of crime. This could be achieved either by clearly specifying the purpose in the AML or by deleting altogether the intended purpose," the report said.

"The law should also criminalise, where necessary, the following conducts and add them to the list of predicate offences in the AML: participation in an organised (non-terrorist) criminal group and racketeering; trafficking in human beings and migrant smuggling; sexual exploitation, including sexual exploitation of children; illicit trafficking in stolen and other goods; corruption and bribery; fraud; counterfeiting and piracy of products; environmental crime; murder, grievous bodily injury; kidnapping, illegal restraint and hostage-taking; robbery or theft; smuggling; forgery; piracy; and insider trading and market manipulation."

The IMF also urged authorities to ensure that predicate offences for money laundering all extend to conduct that occurred in another country when there is dual criminality and to provide in-depth training to the law enforcement agencies on the AML and on money laundering trends and typologies.

"Although the authorities maintain that the terrorist financing offence is covered by the notion of the 'terrorist crimes' that appears in Article 2 of the AML, it is also recommended, for the sake of clarity, to specifically mention the terrorist financing offence in the list of predicate offences."

The report said Qatar's Financial Intelligence Unit, which was created in 2006, also needs to be upgraded so it can have more powers. "The authorities are recommended to address the legal basis that established the unit as a national centre for receiving, analysing and disseminating disclosures of suspicious transactions reports (STRs) and other relevant information concerning suspected money laundering activities. While the unit appears to operate in practice, it should be grounded on a sound legal basis," it said.

"They should ensure that the unit provides financial institutions and other reporting parties with guidance regarding the manner of reporting, including the procedures to be followed when reporting."

It said the unit should also be developed to enhance the depth and quality of its STRs analysis, in particular by accessing the central reports system (CRS) and requesting on regular basis additional information from reporting entities and the Economic Crime Prevention Division (ECPD).

It should also be enabled to use, when necessary, the CRS, the link to the commercial register developed by the Qatar Central Bank, the real estate register and all available databases to enhance its STR analysis.

Other recommendations for the development of the FIU included:

- Ensure that the unit establishes mechanisms for co-operation with regulators, supervisors, reporting entities and law enforcement authorities to optimise its analysis and establishes an information flow that protects confidentiality while enhancing its analysis capacity.

- Grant the unit the power to ask the DNFBPs (designed non-financial businesses and professions) whether they have had transactions with a person who was the subject of an STR, or to demand additional information from them.

- Ensure that the unit periodically reviews the effectiveness of the system to combat money laundering and financing of terrorism (ML/FT) and improves its collection of statistics.

- Ensure that the FIU publishes periodically annual reports, typologies and trends of ML/FT.

- Ensure that the FIU provides additional specialised and practical in-depth training to its employees. This training should cover, for example, the scope of predicate offences, analysis and investigation techniques and familiarisation with prosecution of ML/FT techniques, and other areas relevant to the execution of the unit's staff functions.

According to the report, the IMF team found that Qatar's anti-money laundering law is flawed in many areas, including legislation, report of suspicious financial transactions and international co-operation in this field. "As for legislation, there was no specific money laundering offence in the Qatari Penal Code. Moreover, the existing legislation on confiscation and provisional measures was inadequate for dealing with money laundering," it said.

"In the financial sector, the anti-money laundering measures were essentially based on requirements imposed by the QCB through circular No 33 of 1999. Customer identification provisions did not require financial institutions to take steps to determine the true identity of people on whose behalf a transaction was conducted when there were doubts as to whether a customer was acting on his own or another's behalf," the report added.

The team also found what it called several weaknesses in the obligation for reporting suspicious transactions.

"The QCB reporting requirement was weak in that it required reporting only when the institution detected crime or money laundering attempts rather than suspicions of money laundering. The configuration of the reporting chain was also a potential weakness. The fact that the QCB received the report and passed it to the Ministry of Interior seemed to be an additional layer in the reporting chain that did not improve the overall efficiency of the system," it said.

"Regarding international co-operation, extradition for money laundering was not possible and the Qatari authorities were not permitted to honour foreign requests for imposition of provisional measures against funds or property located in Qatar. Authorities were also not allowed to provide information on suspicious transactions to foreign requesters."



QATAR'S RESPONSE

- The Qatari authorities acknowledge and appreciate the important contribution the Financial Action Task Force continues to make in the international fight against ML/TF and would also like to express their gratitude to the International Monetary Fund's assessor team for its commitment and valuable contribution to Qatar's ongoing AML/CFT efforts.

- Qatar is pleased that the assessment report highlights the fact that there is currently no evidence of significant money laundering in Qatar, that the level of predicate offences is low compared to other countries and that Qatar ranks among the less corrupt countries in the region. 

- The Qatari authorities are acutely aware of the risks attendant on a rapidly growing financial sector and are committed to the continued development of a robust AML/CFT framework including the development of a legal and regulatory regime that will ensure ongoing high level compliance with the FATF

Recommendations

- Qatar places the highest importance on AML/CFT and has worked hard over the last few years to address ML/TF risks. 

- As part of this commitment, the Qatar Government has decided to merge Qatar's two financial services legal and regulatory regimes and to introduce a single financial services regulator that will oversee all financial institutions (with the Qatar Central Bank retaining a focus on core central bank functions including monetary policy and the operation of the payment systems). The decision to create a new single regulator will mean that all financial institutions in Qatar will be subject to the measures (including on AML/CFT) currently upheld by the QFC.

- The Qatari authorities recognise the crucial role that the National Anti-Money Laundering & Counter Terrorist Financing Committee and the FIU play in the fight against ML/TF and are continuing to implement new strategies to enhance their effectiveness, including establishing a strong legal foundation for the FIU, and strengthening co-operation between all authorities.

- A number of initiatives have already been undertaken or are under way to enhance Qatar's AML/CFT framework.

LOW OFFENCE RATE

The level of predicate offences appears very low in Qatar in comparison to other countries. According to statistics issued by the United Nations, the total crimes recorded in Qatar were 9.9 per 1,000 populations compared to an average of 33.7 per 1,000 for the 92 countries surveyed. Sanctions appear to be tougher in Qatar as prisoners account for one per cent of the population as compared to 1.51 per cent for the average of countries surveyed. There was no specific mention of Qatar in the UN International Narcotic Control Board and UN World Drug 2006 reports.



FINANCIAL SECTOR

There are 17 banks [nine Qatari, 8 foreign], three investment companies, 19 exchange houses, one finance company, eight insurance firms, and 7 brokerage firms operating in Qatar. Based on QCB information in 2005, total assets of banking institutions amounted to QR127,934m or 83 per cent of GDP.