Banking Industry Best Practices for Compliance in St. Kitts and Nevis: A Risk-Based Approach
The financial regulations in St. Kitts and Nevis are guided by the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) legislation, which applies to all regulated businesses operating in the country. The Financial Services Regulatory Commission (FSRC), responsible for regulating and supervising compliance with AML/CFT requirements, has implemented a risk-based supervision framework to ensure effective oversight.
The Risk-Based Supervision Framework
The FSRC’s Risk-Based Supervision Framework was adopted in May 2015 and revised in June 2017. This comprehensive approach examines regulated entities through both off-site and on-site examinations, aiming to assess their compliance with AML/CFT legislation and overall soundness.
On-Site Examinations
Comprehensive on-site examinations are conducted by Examiners from the FSRC-Nevis Branch to ensure that regulated entities comply with relevant laws and regulations. During these examinations, Examiners assess the adequacy of policies and procedures for identifying and managing risks related to money laundering and terrorist financing.
Customer Due Diligence
A key aspect of AML/CFT compliance is customer due diligence, requiring regulated entities to:
- Identify and verify customers
- Obtain and maintain relevant records
- Monitor transactions and report suspicious activities
Entities must make this information available to competent authorities and those conducting AML/CFT due diligence.
Review of Customer Files and Applications
Examiners review relevant customer files and citizenship by investment applications to ensure that adequate Know Your Customer (KYC) and Customer Due Diligence (CDD) documents are obtained and kept up-to-date. These documents include:
- Government-issued identification
- Letters of reference
- Proof of address
- Other relevant records
Assessment of Internal Controls
The FSRC also assesses the effectiveness of regulated entities’ internal controls, policies, practices, and procedures for compliance with AML/CFT legislation. This includes:
- Ongoing monitoring programs
- Training schedules
- Suspicious transaction reporting
- Record keeping systems
- Retention periods
- Conditions for maintaining records
Monitoring Frequency and Intensity
The results of on-site examinations influence the intensity and frequency of monitoring, with entities operating in a satisfactory manner requiring less frequent monitoring than those with weaknesses and deficiencies. By implementing this risk-based approach, the FSRC aims to ensure that regulated businesses in St. Kitts and Nevis maintain high standards of compliance with AML/CFT legislation.
In summary, the banking industry in St. Kitts and Nevis must adhere to a risk-based approach for AML/CFT compliance, ensuring that regulated entities implement effective internal controls, policies, and procedures to identify and manage risks related to money laundering and terrorist financing.