Financial Crime World

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Financial Institutions Required to Implement Effective Anti-Money Laundering and Countering Financing of Terrorism Measures

Financial institutions are required to implement an effective anti-money laundering (AML) and countering financing of terrorism (CFT) framework in accordance with Section 1.2(a) of the AML Regulations 2002.

Risk-Based Approach

A risk-based approach must be applied when implementing the AML/CFT framework, as outlined in Section 2.1(a) of the AML Regulations 2002. This requires financial institutions to identify, assess, and mitigate the risks associated with money laundering and terrorist financing.

Guidance from International Organizations

Financial Action Task Force (FATF) guidelines and recommendations provide valuable guidance on the implementation of an effective AML/CFT framework, as referenced in Section 2.1(b) of the AML Regulations 2002. The FATF is an inter-governmental body that sets global standards for combating money laundering, terrorist financing, and proliferation financing.

The Banking Act 1987 and the AML Regulations 2002 form the national legal and regulatory framework for combating money laundering and terrorist financing in the RMI. Financial institutions are required to put in place an effective, risk-based AML/CFT framework that includes customer due diligence measures, reporting of suspicious transactions, and record keeping, as stated in Section 2.2(b) of the AML Regulations 2002.

National Priorities

The RMI has completed its first National Risk Assessment (NRA) on money laundering and terrorist financing, which identified domestic threats and sectorial vulnerabilities. Financial institutions are required to consider these priorities when implementing their AML/CFT framework, as stated in Section 2.3(b) of the AML Regulations 2002.

Responsibility

The Banking Commissioner is designated as a competent authority for the supervision and monitoring of financial institutions’ compliance with the AML Regulations 2002. The Banking Commissioner is responsible for taking reasonable measures to ensure that financial institutions comply with these regulations, as stated in Section 2.2(c) of the AML Regulations 2002.

Terminology

The guidelines use “must”, “should”, and “may” throughout to provide clarity on the various directions. These terms have the following meanings:

  • Must: a requirement in legislation or regulation.
  • Should: good practice for most situations.
  • May: an option for meeting obligations or running business.

Guidance and Training

Financial institutions are encouraged to refer to guidance material available from international and regional organizations, such as the FATF and Asia-Pacific Group on Money Laundering (APG). It is the sole responsibility of each financial institution to keep itself apprised and updated on money laundering and terrorist financing risks and to maintain appropriate risk identification, assessment, and mitigation programs.

Updates

These guidelines will be updated or amended from time to time by the Banking Commissioner as deemed necessary. Financial institutions should bear in mind that these guidelines are not the only source of guidance on assessing and mitigating money laundering and terrorist financing risks.