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Macao’s Financial Regulators Emphasize Risk-Based Approach to Combat Money Laundering and Terrorist Financing
Strengthening Defenses Against Money Laundering and Terrorist Financing
In a bid to enhance its defenses against money laundering and terrorist financing, Macao’s financial regulators have underscored the importance of adopting a risk-based approach to mitigate these risks. This approach involves identifying, assessing, and understanding the vulnerabilities that exist in the country’s financial system and taking targeted measures to address them.
The Benefits of a Risk-Based Approach
According to local authorities, this flexible framework allows for a more efficient allocation of resources, enabling banks and regulatory bodies to focus on high-risk areas while adopting simplified measures in lower-risk sectors. By doing so, Macao can avoid the pitfalls of de-risking behavior that can undermine financial stability.
Guidance for the Banking Sector
To support the implementation of this approach, regulators have issued guidance specifically tailored to the banking sector, taking into account national risk assessments and the country’s legal and regulatory framework. The guidance aims to foster a common understanding among supervisory authorities and banks on how to apply the risk-based approach in practice, providing concrete examples to facilitate its effective implementation.
Key Features of the Guidance
- Understanding the Risk-Based Approach: The first section explains the key elements of the risk-based approach, including identifying vulnerabilities and assessing risks.
- Guidance for Banking Supervisors: The second section provides specific guidance for banking supervisors on how to apply the risk-based approach in practice.
- Practical Advice for Banks: The third section offers practical advice for banks seeking to implement this framework effectively.
Next Steps
Regulatory bodies are now urging financial institutions to familiarize themselves with these new guidelines, which are expected to play a crucial role in preventing money laundering and terrorist financing activities in Macao.