Financial Crime World

Money Laundering/Terrorist Financing/Proceeds of Crime (ML/TF/PF) Risk Assessments for Supervised Financial Institutions in The Bahamas

Guidance Overview

The following guidance note provides a comprehensive framework for Money Laundering/Terrorist Financing/Proceeds of Crime (ML/TF/PF) risk assessments for Supervised Financial Institutions (SFIs) in The Bahamas. This document outlines key considerations, best practices, and evaluation frameworks to help SFIs effectively manage ML/TF/PF risks.

Key Considerations

Qualitative and Emerging Risk Factors

  • SFIs should consider other qualitative risk factors that could impact operational risks and contribute to an increase or decrease in ML/TF/PF likelihood.

  • These may include:

    • Global economic trends
    • Regional security concerns
    • Technological advancements
    • Changes in regulatory requirements

Establishing Controls and Measuring Effectiveness

  • SFIs must ensure a clear connection between inherent risks and AML/CFT/CPF controls and measures, with a logical ‘cause and effect’ relationship between the inherent risks and the controls implemented to mitigate these risks.

  • This includes:

    • Identifying and assessing inherent risks
    • Establishing effective controls and measures to mitigate these risks
    • Regularly monitoring and reviewing the effectiveness of these controls

Evaluating Residual Risks

  • After identifying and assessing inherent risks and establishing effective controls and measures to mitigate these risks, SFIs must evaluate their residual risks by balancing the level of inherent risks with the overall strength of the risk management controls.

  • This involves:

    • Assessing the likelihood and potential impact of ML/TF/PF activities
    • Evaluating the effectiveness of existing controls and measures
    • Identifying areas for improvement and implementing additional controls as necessary

Evaluation Framework

The following framework provides a structured approach to evaluating AML/CFT/CPF controls across various categories:

Corporate Governance

  • Board of directors’ oversight and involvement in risk management
  • Clear policies and procedures for ML/TF/PF risk assessment and mitigation
  • Regular review and update of these policies and procedures

Know Your Customer Policies and Procedures

  • Effective customer due diligence processes
  • Ongoing monitoring and verification of customer information
  • Identification and reporting of suspicious transactions

Tiered Training for Staff and Executive Management

  • Comprehensive training programs for staff and executive management on ML/TF/PF risks and controls
  • Regular updates and refreshers to ensure ongoing awareness and knowledge
  • Performance evaluations that include assessment of compliance with AML/CFT/CPF policies and procedures

Record-Keeping and Retention

  • Accurate and complete records of customer information, transactions, and risk assessments
  • Effective record retention policies and procedures
  • Regular review and update of these policies and procedures to ensure ongoing compliance