TF Risks Must Be Addressed: Experts Call for Effective Regulation

In light of the growing threat of terrorist financing (TF) and money laundering, financial experts are urging countries to establish a robust legal and regulatory framework to address these risks. Banks must also take concrete steps to identify and mitigate TF risks, while competent authorities and supervisors must issue clear guidance on how to implement anti-money laundering/combating the financing of terrorism (AML/CFT) obligations in a risk-sensitive manner.

The Risk-Based Approach

The risk-based approach (RBA) is essential for effective AML/CFT measures, allowing banks to apply different levels of scrutiny based on the level of TF risk. However, this approach also requires competent authorities and supervisors to provide clear guidance on how banks should meet their AML/CFT obligations in a way that is proportionate to the risks they pose.

Financial Inclusion Key to Successful Implementation

Experts emphasize that financial inclusion can play a crucial role in reducing TF risks, particularly for low-income individuals who may experience difficulties accessing the regulated financial system. By establishing specific cases for exemptions in the application of FATF Recommendations based on proven low risks, countries can foster financial inclusion while still maintaining robust AML/CFT measures.

Supervisors Must Play Key Role

The RBA also requires supervisors to allocate their resources effectively, focusing on areas of higher ML/TF risk. Supervisors must have access to all relevant information to determine a bank’s risk profile and ensure that banks are applying AML/CFT measures commensurate with the level of risk.

Guidance Essential for Successful Implementation

To support the successful implementation of the RBA, competent authorities and supervisors must provide clear guidance on how banks should apply AML/CFT measures. This includes providing information on what constitutes a low-risk situation and how banks can demonstrate that they have taken a risk-based approach to AML/CFT.

Conclusion

In conclusion, addressing TF risks requires a comprehensive approach that involves effective regulation, supervision, and implementation of AML/CFT measures by banks. By establishing a robust legal and regulatory framework and providing clear guidance on the application of AML/CFT obligations, countries can reduce TF risks while promoting financial inclusion.