The Basel Committee on Banking Supervision has issued new guidelines designed to help banks address the risks related to money laundering and financing of terrorism. The same guidelines could also help other types of businesses with their compliance programs.
The January guidelines (available here in pdf) address risk monitoring, properly training staff and giving compliance personnel the authority needed to detect suspicious transactions.
The Basel Committee is a group of bank supervisory authorities from 27 countries. They coordinate supervisory matters to improve the quality of banking supervision worldwide. The group is headquartered in Basel, Switzerland, where it meets three or four times a year.
Some of the essential components of a sound money laundering (ML) and financing of terrorism (FT) risk management program described in the new guidelines are:
- A comprehensive risk assessment that evaluates all of the inherent and residual risk factors present in a country, within an industry sector, product line and among its business relationships, including delivery channels.
- The board of directors should approve and oversee the bank's policies for risk, risk management and compliance to ensure they are sufficient to meet the bank's ML and FT risks.
- The board of directors and senior management should appoint a qualified chief Anti-Money Laundering and Finance of Terrorism Officer who will have overall responsibility for the ML/FT function. This person should possess the stature within the bank such that issues raised by this senior officer will receive the necessary attention from the board, management and all business lines.
- To ensure conflicts of interest are avoided, the Chief ML/FT Officer should not have business-line responsibilities, data-protection duties or serve as part of internal audit.
- Banks should recognize that the first line of defense in identifying and controlling risks is front-office staff and customer-facing personnel. There should be internal procedures this staff can use to detect and report suspicious transactions.
- Internal audit should independently evaluate the risk management program and controls of the bank by examining ML/FT policies in terms of their adequacy, the effectiveness of the bank staff in implementing them and the the training of staff in them.
- The goal of the guidelines is to provide for the overall safety of the international financial system. As the Committee points out, though, these best practices will protect the reputations of the banks and save them the cost of regulatory penalties for having inadequate policies and controls. Those are objectives every business can appreciate.
The Basel Committee on Banking Supervision publication 'Sound management of risks related to money
laundering and financing of terrorism' published January 2014 is here (in pdf).
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.