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Banks and Financial Institutions Required to Implement Stringent Compliance Standards

Kathmandu, Nepal - New Guidelines Issued by Financial Intelligence Unit

The Financial Intelligence Unit (FIU) has issued guidelines for banks and financial institutions (FIs) to prevent money laundering and terrorist financing. These guidelines require banks and FIs to implement a comprehensive compliance program that includes:

  • Appointment of a senior-level Compliance Officer
  • Formulation and periodic review of policies and procedures
  • Approval of Know Your Customer (KYC), Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT) and Sanctions policy

Comprehensive Compliance Program Requirements

Banks and FIs must also establish a risk-based approach towards assessing and managing money laundering and terrorist financing risks, including:

  • Establishing systems for sanctions screening
  • Identifying Politically Exposed Persons (PEPs), Relatives and Close Associates (RCAs)
  • Transaction monitoring

Additionally, banks and FIs are required to:

  • Maintain records of all transactions for a minimum prescribed period
  • Provide training and awareness to all relevant employees
  • Conduct independent testing by the Internal Audit Department to ensure the adequacy and effectiveness of the KYC/AML/CFT program

Compliance Structure

To ensure effective management of compliance risk, banks and FIs are required to establish a Compliance Structure that includes:

Board-level Risk Management Committee

  • Ensuring an appropriate KYC, AML and CFT policy is in place
  • Reviewing reports from the Compliance Officer

Asset Laundering Prevention Committee

  • Monitoring and reporting on anti-money laundering activities

Head of Compliance Department

  • Overseeing the KYC/AML/CFT functions
  • Reporting to the Board of Directors

Roles and Responsibilities

The guidelines outline the roles and responsibilities of various bodies involved in KYC, AML and CFT compliance, including:

Board of Directors

  • Ensuring an appropriate KYC, AML and CFT policy is in place
  • Reviewing reports from the Compliance Officer

Head of Compliance Department

  • Overseeing the KYC/AML/CFT functions
  • Reporting to the Board of Directors

Compliance Officer

  • Managing the money laundering and terrorist financing risk
  • Reporting to the Head of Compliance Department

Province Manager

  • Acting as a monitoring level authority
  • Ensuring compliance with policy and procedures in their respective province

Penalties for Non-Compliance

Failure to comply with these guidelines may result in penalties, including fines and even revocation of banking licenses. The guidelines are designed to prevent money laundering and terrorist financing and ensure the integrity of the financial system.

Implementation Deadline

Banks and FIs are required to implement these guidelines by [insert deadline]. Failure to comply may result in regulatory action.