A recent report issued by the International Monetary Fund (IMF) has found no evidence of terrorist groups receiving finance through Qatar and only minimal levels of money laundering, which comes as good news for the country's international standing and for its banking sector.
Released on October 2, the IMF's "Qatar: Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism" said there had been no reports of suspicious transactions related to terrorist financing from Qatar, nor had there ever been any significant terrorist activity on its soil.
Using methodology laid down by the Financial Action Task Force (FATF), the report also noted that Qatar had enacted a series of laws dealing with anti-money laundering and combating the financing of terrorism (AML/CFT) since 2002.
In its assessment, the IMF said that Qatar was, after the United Arab Emirates (UAE), "the most financially developed economy" in the region. However, while the country has a growing financial sector, driven in part by a booming property market, the report warned that Qatar could be a victim of its own success.
"These developments have the potential of creating a suitable environment for money launderers seeking to exploit these conditions to exercise their illegitimate activities," it said.
Following on from that warning, the report highlighted some weaknesses in Qatar's AML/CFT legislation that needed to be addressed. In particular, the report said the allocation of resources to AML/CFT appeared to be uneven, especially in view of the rapid development and diversification of Qatar's economy.
"The professional standards, including those related to confidentiality, are not fully developed," the report said. "There is a lack of specialist skills training in law enforcement authorities, including prosecution agencies, the Financial Intelligence Unit, supervisors and other competent authorities involved in combating money laundering and financing of terrorism."
The report said Qatar should consider centralising its AML/CFT activities, rather than having a multiple number of agencies including the ministry of interior's economic crimes prevention division, the Public Prosecutor's Office, the State Security Bureau and the Customs bureau all having an investigative role. "The various agencies do not appear to be sufficiently structured, funded, and resourced to effectively carry out their functions," it stated.
Sheikh Fahad bin Faisal al-Thani, Qatar Central Bank's (QCB) deputy governor and chairman of the country's National Anti-Money Laundering and Terrorist Financing Committee, said that while the report found no evidence of any significant money laundering activity, more measures would be implemented to ensure full compliance with the FATF's guidelines and recommendations.
"We acknowledge that the report identifies a number of areas for improvement and we will act swiftly and efficiently to address these matters," he said in a statement on October 4. "The work of safeguarding Qatar's financial system in line with internationally accepted norms is important to us all and I am fully committed to maintaining our rapid progress on this front."
Even before the results of the IMF study were released, Qatar had acted to further strengthen its regulations governing money transfers. New rules issued by the QCB in early September require that all the transactions made by personal banking customers, including those conducted via the internet, must include the full details of the remitter and beneficiary.
Under the new regulations, the full name, account number and address of the person or organisation receiving the funds, along with the name, address and phone numbers of the remitter must be provided, as well as the purpose of the transfer.
These new regulations will go a long way to address the criticism in the IMF report that there was some "inconsistency in the measures in place to detect cross-border transportation of currency and bearer negotiable instruments in Qatar".
The IMF's generally favourable report, and Qatari authorities' positive response to its calls to bolster financial monitoring and anti-laundering regulations can have direct implications for the country's banking industry.
Being given a clean bill of health, with a few reservations, means it is unlikely that Qatar's banks will come under the same kind of scrutiny or receive the same adverse publicity as some of the other financial institutions in the region.
Earlier this year, the US Treasury Department announced sanctions against Bahrain-based Future Bank, due to its supposed close ties with Iran's Bank Melli, which Washington claims aided Tehran's alleged nuclear proliferation activities.
While not a criticism of Bahrain's banking sector as a whole, the adverse publicity was not welcome, and is something Qatar would naturally like to avoid as it strives to improve its credentials as a regional finance centre.
