Modern Diplomacy via Twitter: the G6 + 1

In the days leading up to the G7 Summit in Charlevoix, Canada, both social and more traditional media were awash with belligerent tweets from various heads of state. Despite these tweets, which had been triggered by President Donald Trump’s decision to impose steel and aluminium tariffs, the G7 Summit went ahead, and focused on five main themes: 1. Investing in growth that works for everyone.

2. Preparing for jobs of the future.

3. Advancing gender equality and women’s empowerment.

4. Building a more peaceful and secure world.

5. Working together on climate change, oceans and clean energy.

At the end of the summit, the leaders issued the G7 Charlevoix Communiqué. This was supported by all G7 countries, despite Trump’s tweets following Justin Trudeau’s press conference indicating he had instructed the U.S. representatives not to endorse the declaration. As the Communiqué had to be agreed, and had been tirelessly negotiated between all G7 countries, it was in effect already endorsed, but now it is down to each of the G7 members to decide how to implement commitments made at Charlevoix.

In terms of financial crime prevention, several commitments were made across the G7 Communiqué, and there was also a brief mention in the Charlevoix Commitment on Equality and Economic Growth (the Commitment), one of several secondary documents issued to support the Charlevoix Communiqué.

Tax evasion

The G7 leaders indicated that they would continue to fight tax evasion and avoidance. They also agreed to work together to seek a consensus-based solution by 2020 on the digitisation of the economy and its impact on the financial and tax system; these developments should be followed closely, particularly by those organisations caught under the UK’s Criminal Finances Act 2017, which holds companies liable for corporate failure to prevent tax evasion.

In the Commitment, the leaders also pledged to promote the implementation of international standards on financial accounts and beneficial ownership to fight tax evasion alongside corruption, money laundering and terrorist financing. This means that financial institutions operating in multiple jurisdictions should soon find it easier to identify and verify beneficial ownership structures more quickly, while making it increasingly difficult for criminals and tax evaders to hide illicit funds. This should enable them to identify unusual structures and behaviour.

Terrorism

The leaders further committed to work together to counter terrorism and to address the use of the internet for terrorist purposes. This will be achieved in part through the Global Internet Forum. Financial institutions implementing new transaction monitoring systems using regtech may wish to consider how to work with the Global Internet Forum to develop more surveillance-based transaction monitoring systems to improve efforts to identify and clamp down on fund flows that are indicative of terrorist financing.

Human trafficking and modern slavery

The leaders underscored the importance of taking concrete steps to eradicate the trafficking of persons, forced labour, child labour and all forms of slavery, including modern slavery. To tackle this, G7 leaders said they would take a strong stance against human rights abuses, human trafficking and corruption across the globe and call on the international community to take action in these areas.

The Global Slavery Index identified in 2016 approximately 48.5million people in forced labour or slavery. The United Nations (UN) estimates that human trafficking yields approximately $150 billion per year, with 71 percent of affected persons being women and girls. The UN also released its first set of human trafficking-related sanctions against six known leaders of trafficking networks in Libya in an unprecedented move on June 8, 2018.

In addition to ensuring that screening and payment filtering systems have been updated with these names, financial institutions should also identify human trafficking typologies to add to transaction monitoring systems.

Higher-risk countries

A number of countries were called out in the section on “Building a more peaceful and secure world”, something which should be monitored closely in case G7 countries move either to scale back or implement sanctions, or funds are laundered through these because of political instability.

In the lead-up to a historic summit between Trump and North Korean president Kim Jong-un, G7 countries showed solidarity by issuing a statement recognising some of the measures undertaken by North Korea, including a commitment to denuclearisation made in the April 27, 2018 Panmunjom Declaration. The G7 continue to call on North Korea to dismantle “irreversibly” its weapons of mass destruction (WMDs). If progress is made, sanctions could be eased still further, opening up business with North Korea.

The G7 leaders recognised the threat that Iran’s ballistic missile programme presents to peace and security and committed to work to ensure Iran’s nuclear programme remains peaceful in line with international commitments never to seek, develop or acquire a nuclear weapon.

Russia also made an appearance on the communique, despite Trump’s calls for bringing Russia back into the G7. G7 leaders agreed with the UK’s assessment that it is highly likely the Russian Federation was responsible for the attack in Salisbury and that there are no possible alterative explanations. G7 leaders also urged Russia to “cease its destabilising behaviour to undermine democratic systems and its support of the Syrian regime”. Additionally, the leaders recalled that current sanctions are linked to Russia’s failure to demonstrate the implementation of the Minsk Agreement and said they stood ready to take further restrictive measures to increase costs on Russia.

G7 leaders also pledged to coordinate efforts to build welcome and lasting peace and support democratic transition in Myanmar, citing the Rohingya crisis to allow the return of refugees. They expressed concerns about the lack of respect for human rights and spiraling economic crisis in Venezuela, about the Israeli-Palestinian conflict and the deteriorating situation in the Yemen. The leaders further re-iterated their commitment democracy in Libya.

Risk assessments

As the geo-political landscape continues to evolve, banks should identify how risks such as capital flight, the laundering of proceeds of corruption and terrorist financing enabled by the various international conflicts could affect their overall risk and control framework. Customer risk assessments may need to be amended and sanctions lists checked to ensure that as new sanctions are implemented and old ones removed, banks are operating effectively.

Yes, the G7 Summit at Charlevoix Canada became a theatre for challenging conversation and shows of poor statesmanship. Many think it is irrelevant, but it is an important forum that is pivotal for driving forward domestic political agendas and enabling frank and open discussions about issues that matter, especially for the G6 +1. In the field of financial crime prevention, there are important areas that need to be taken in to account to implement the risk-based approach while carrying out horizonplanning work. These include, tax evasion, terrorism, human trafficking and country risk.

3 July 2018

Originally published on Thomson Reuters Accelus