Financial Institutions Urged to Enhance AML/CFT Handbooks Amid Rising ML/TF Risks

The Financial Services Commission (FSC) has issued amendments to its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Handbook to combat the growing menace of money laundering (ML) and terrorism financing (TF).

Emphasis on Business Risk Assessments

The revised handbook emphasizes the need for financial institutions to conduct thorough business risk assessments (BRAs) to identify potential vulnerabilities and risks. These BRAs should take into account factors such as:

The nature, scale, and complexity of the institution’s operations
Its customer base
Third-party service providers and outsourcing arrangements

A comprehensive BRA should cover all aspects of AML/CFT, including:

Policies and procedures
Internal risk assessments
Customer due diligence
The risks associated with third-party service providers and outsourcing arrangements

Independent Audits Crucial for Effectiveness

The handbook emphasizes that independent audits are crucial in ensuring the effectiveness of an institution’s AML/CFT controls. These audits should be conducted regularly and cover a range of areas, including:

AML/CFT policies and procedures
Internal risk assessments
The implementation and effectiveness of mitigating controls

Compliance Issues Found During Inspections

During a recent inspection, the FSC found that many financial institutions were lacking in their compliance with AML/CFT regulations. Specifically, only 28% of institutions had conducted independent audits, and those that did failed to cover all aspects of AML/CFT.

To address these issues, the FSC is urging financial institutions to:

Conduct thorough BRAs
Implement effective AML/CFT policies and procedures
Establish robust internal risk assessments and customer due diligence processes
Engage independent auditors to verify the effectiveness of their AML/CFT controls

Deadline for Compliance

The revised handbook will be effective from [Date]. Financial institutions that fail to comply with the new requirements by this deadline risk facing penalties and reputational damage.

FSC Commitment to Combating ML/TF

“We are committed to ensuring that our financial system is robust and resilient against ML/TF threats,” said [Name], Director of the FSC. “These amendments are designed to help financial institutions identify and mitigate risks, and we expect them to take these measures seriously.”

The FSC has released its latest inspection findings, which show that many financial institutions still have significant weaknesses in their AML/CFT controls. The commission is urging all financial institutions to take immediate action to address these issues and improve their compliance with AML/CFT regulations.