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    Position Paper

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    arjunmalik0801
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    Position Paper

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    arjunmalik0801

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    © All Rights Reserved
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    of 5

    Committee- Group of 20 (G20)

    Agenda- Strengthening Financial Security: Regulating Hedge Funds, Enhancing Public


    Private Partnerships (PPPs) and combating money laundering
    Country- United States of America

    The United States of America has been at the forefront of innovation and trade in the global
    markets ever since industrialization and globalisation. The US recognises its responsibility to
    act as the epitome of peace and sustainability. To ensure peace is upheld on the world stage,
    The US has often aided numerous countries such as Ukraine and Afghanistan in their times of
    conflict, these aforementioned aids have surpassed a sum total of 70 billion dollars. However,
    terrorism and peace disruption has evolved into a much more complicated web of deceit and
    financial proliferation.

    The US without a shadow of doubt stands against any economies or entities which have the
    slightest tolerance and lax towards such crimes. The G20 was developed to reduce
    international cohesion, to encourage more sustainable and inclusive economic growth and to
    maintain financial stability. The US has identified numerous parameters and methods by
    which such crimes take place and have imposed strict regulatory acts on them. Since the
    induction of the first hedge fund in 1949 by Alfred Winslow Jones (AW Jones), ever since the
    hedge fund industry has seen an exponential rise and today stands tall as a $5.47 trillion
    industry.

    Money Laundering according to the layman, is just a way of moving money around to avoid
    paying taxes. However The US had identified the severe repercussions that it holds towards
    the world as a whole. Laundered money could be used by organisations to fund terrorist
    entities such as the Taliban. On a more economical note an increase in the laundering of
    money could lead to additional capital being made available to speculators in the market who
    could manipulate a country’s currency for their own benefit.

    Post the biggest financial turmoil on US soil of 2008, The US identified where their
    regulations lacked and made due changes to their system to create a more robust financial
    system for all retail and institutional traders in the country. The US’s regulations are relevant
    to today’s age and are in compliance with the majority of the Financial Action Task Forces’
    (FATF) recommendations regarding combating money laundering and financing of terrorism
    & proliferation. The following is a brief outline of the changes The US has made
    domestically and internationally in adherence to the committee's agenda:

    ● Regulating Hedge Funds

    ○ After the 2008 crash The US identified ways that caused discrepancies in the
    market and formulated The Dodd Frank act which increased regulatory
    surveillance on not only banks but numerous investment classes ranging from
    Hedge Funds to Stock brokers.

    ○ The US has also made it compulsory for Hedge Funds dealing in derivatives to
    report the trades they make in financial instruments such as options, futures,
    swaps and forwards to be reported to the Commodity of Futures Trade
    Commision (CFTC).

    ○ The Regulation of short selling (regulation SHO) has made a number of


    provisions including a locate requirement and close in requirement which
    states that the fund should have a procedure in place to locate the assets that
    they are shorting and if they fail to do so, they are liable to penalties and a
    forced buy in.

    ● Financial Terrorism and Proliferation

    ○ The US was one of the main countries which introduced resolution 1267
    (1999) in the United Nations Security Council (UNSC) which was the first
    step taken to counter financial terrorism at a global scale

    ○ The US also was in favour of resolution 1540 (2004) which prevented terrorist
    organisations and similar entities from gaining access to weapons of mass
    destruction (WMDs). This resolution prevented financial proliferation at a
    huge scale.

    ○ Cryptocurrency is now being used by numerous entities to move money


    around without getting caught due to its unregulated nature. The US
    recognised this and thus the Office of Foreign Assets Control (OAFC) has
    begun to link crypto wallets to sanctioned individuals. Additionally, the
    Department of Justice (DOJ) has issued a regulatory framework around the
    illicit use of cryptocurrency.

    ● Enhancing Public Private Partnerships

    ○ The Financial Crime Enforcement Network (FinCEN) facilitates public private


    partnerships by conducting regular information sharing sessions between
    government agencies and financial institutions. This has helped in curbing
    money laundering and hindered the access of finances to the terrorist
    organisations.

    ○ The US government ensures the financial institutions to work in adherence to


    Anti Money Laundering Laws (AMLs) and Counter terrorism Financing
    (CFT) regulations. They also ensure to create strategies in collaboration with
    banks to uncover illicit finance.

    In the current economy financial proliferation holds the biggest threat to financial stability of
    the economy. The United States of America in the G20 conference will aim to collaborate
    effectively with the present nations to formulate solutions and possibly create a working
    paper and draft resolution in the duration of the conference. The solutions proposed by the
    United States of America will mainly revolve around regulating cryptocurrency as an asset
    class to prevent illicit financing not only in the western region but throughout the world.
    Additionally, the main cause of concern regarding hedge funds is their aggressive nature in
    short selling and speculating. To counter this, The US would propose a mandate to increase
    the minimum underlying exposure to invest in the foreign currency market. Though this may
    make the market illiquid for a certain while, this move would help maintain a stable exchange
    rate between countries. The main opposing nation to this might be Japan. This is because the
    Japanese currency Yen is often seen as the most stable currency and is used by many forex
    traders to perform carry trades. The imposition of this underlying exposure constraint would
    prevent trading in Yen which could cause the overall demand of Yen to fall leading to a
    depreciation in their currency.

    In the end, The United States Of America would keep collaboration and global interest at the
    top of their priority list during the conference.
    Works Cited

    “Fact Sheet Regarding the Treasury Department’s Use of Sanctions: Authorised under

    Section 311 of the USA PATRIOT ACT.” U.S. Department of the Treasury, 20 Dec.

    2002, home.treasury.gov/news/press-releases/po3711. Accessed 19 Aug. 2024.

    FATF. INTERNATIONAL STANDARDS on COMBATING MONEY LAUNDERING and the

    FINANCING of TERRORISM & PROLIFERATION. 2023,

    www.fatf-gafi.org/content/dam/fatf-gafi/Recommendations/FATF%20Recommendati

    ons%202012.pdf.coredownload.inline.pdf. Accessed 19 Aug. 2024.

    Hayes, Adam. “Dodd-Frank Wall Street Reform and Consumer Protection Act .”

    Investopedia, 19 Feb. 2024,

    www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp.

    Accessed 19 Aug. 2024.

    “Meetings and Documents | Security Council.” Un.org, 2020,

    main.un.org/securitycouncil/en/content/meetings. Accessed 19 Aug. 2024.

    United Nations Office on Drugs and Crime. “Combating Terrorist Financing.” United Nations

    : Office on Drugs and Crime,

    www.unodc.org/unodc/en/terrorism/expertise/combating-terrorist-financing.html.

    Accessed 19 Aug. 2024.

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