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Financial Institutions Face Enhanced Supervision Under New ML/TF/PF Risk Assessment Tool

In a move to strengthen financial sector supervision, the Eastern Caribbean Central Bank (ECCB) has introduced a new risk assessment tool aimed at identifying and mitigating money laundering, terrorist financing, and proliferation financing (ML/TF/PF) risks faced by licensed financial institutions (LFIs).

Risk Assessment Tool

The ML/TF/PF Risk Assessment Tool utilizes information gathered from the PR14, a comprehensive questionnaire designed to assess LFIs’ compliance with anti-money laundering and combating the financing of terrorism (AML/CFT) regulations. The tool assesses two major categories:

• Governance Framework: Evaluates an LFI’s ability to implement effective risk management controls, including internal controls, independent testing, skills and expertise required of MLROs/compliance officers, and focus on training.
• Inherent Risk: Assesses the ML/TF/PF risk profile of an LFI’s products and services, customers, entities, and geographic locations. The tool considers factors such as new technologies and their associated risks.

Results and Supervision

The results of the ML/TF/PF risk assessment produce a composite risk rating assigned to each LFI, ranging from low (measures to combat ML/TF/PF are strong) to high (measures are weak). The frequency of supervisory engagements, including examinations, remedial action, and prudential visits, is determined by the assigned risk rating.

Examination Schedule

The following examination schedule is outlined in Table 2:

Conclusion

The ECCB’s new risk assessment tool is designed to enhance the effectiveness of AML/CFT regulations and reduce the risk of ML/TF/PF activities in the Eastern Caribbean region.