Financial Crime World

SC AML/CFT Handbook Amendments: Enhancing Risk-Based Approach to Combat Money Laundering and Terrorism Financing

The St. Christopher and Nevis Financial Services Commission (FSC) has issued amendments to the SC AML/CFT Handbook, aimed at strengthening the risk-based approach to managing money laundering (ML) and terrorism financing (TF) risks in the financial sector.

Key Areas of Focus

The revised handbook emphasizes the importance of a risk-sensitive approach to identifying, assessing, understanding, and monitoring ML/TF risks. Financial institutions must assess six key areas when conducting business risk assessments:

  • Customer Due Diligence: Conduct thorough customer due diligence to ensure accurate identification and verification of customers.
  • Risk Assessment on Third-Party Service Providers (Outsourcing): Assess the ML/TF risks associated with third-party service providers and implement effective controls to mitigate these risks.
  • Internal Risk Assessment: Conduct regular internal risk assessments to identify and assess potential ML/TF risks within the institution.
  • Implementation and Effectiveness of Mitigating Controls: Implement and regularly test the effectiveness of mitigating controls to prevent ML/TF risks.
  • AML/CFT Training: Provide ongoing training to employees on AML/CFT regulations, policies, and procedures.
  • Record Keeping Obligations: Maintain accurate and complete records of all transactions and activities.

Independent Audit: The Final Line of Defence

The independent audit is the financial institution’s final line of defence against ML/TF risks. The revised handbook emphasizes the importance of tailoring the scope of the independent audit to the financial institution’s specific risks.

Every independent audit must mandatorily test compliance in non-exhaustive areas, including:

  • AML/CFT policies and procedures
  • Internal Risk Assessment
  • Compliance Officer function and effectiveness
  • MLRO function and effectiveness
  • Implementation and Effectiveness of Mitigating Controls
  • AML/CFT Training
  • Record Keeping Obligations
  • Targeted Financial Sanctions
  • Suspicious Transaction Monitoring and Reporting

Compliance Levels: TCSP Sector Strength

According to the FSC’s inspection findings, the TCSP sector has demonstrated a high level of compliance in several areas, including:

  • Risk Assessment Policies, Procedures & Systems
  • Customer Due Diligence, including BO and Ongoing Monitoring
  • Enhanced Measures, including PEPs
  • Transaction Monitoring and STR reporting
  • Internal Controls, including Compliance Officer, Training, Audit

The sector’s inherent vulnerability is deemed high, but the post-inspection strengths of controls are also high, indicating a significant improvement in compliance.

Conclusion

The revised SC AML/CFT Handbook amendments aim to enhance the risk-based approach to combating ML/TF risks in the financial sector. Financial institutions must ensure that they comply with the revised requirements to maintain a strong and effective anti-money laundering and combating the financing of terrorism regime.