Financial Institutions Urged to Assess Risks and Mitigate Exposure
The Central Bank of Belize has issued guidance notes for regulated institutions to assess and mitigate risks associated with money laundering and terrorist financing (ML/TF) activities.
Risk Assessment and Mitigation Requirements
Financial institutions must be willing to accept certain risks, but should also be prepared to escalate those that pose significant threats to Senior Management for a decision. They must ensure they have sufficient capacity and expertise to manage the identified risks effectively. The guidelines emphasize that risk mitigation measures must be commensurate with the level of risk identified.
Key Risk Mitigation Measures
- Determine scope of identification and verification requirements
- Set transaction limits for high-risk customers or products
- Establish circumstances under which financial institutions may refuse to take on or terminate high-risk customers/products or services
Residual Risk Evaluation
Residual risk, which is the level of risk remaining after application of risk-mitigation measures, must also be evaluated. If the level of residual risk exceeds a financial institution’s risk tolerance, measures should be increased to mitigate those risks.
Importance of Periodic Monitoring and Review
Financial institutions are required to review their risk assessment programs periodically to assess implications of new products, services, practices, technologies, and delivery channels, as well as changes in customer portfolios or conduct. The guidelines also emphasize the importance of monitoring and reviewing risks regularly to ensure that risk assessments remain up-to-date.
Independent Audit Function
Financial institutions must engage an independent audit function to test internal anti-money laundering (AML), combating the financing of terrorism (CFT), and counter-proliferation financing (CPF) policies, controls, and procedures.
Assessment of New Products, Practices, and Technological Developments
The guidelines also highlight the importance of assessing risks associated with new products, practices, and technological developments. Financial institutions are required to undertake risk assessments prior to launching or using such products, practices, and technologies, and take appropriate measures to manage and mitigate identified risks.
Transparency and Secure Verification Methods
Financial institutions must establish transparent processes for product reviews and approvals, as well as reliable and secure methods to verify customer identities, particularly in internet-based and telephone banking applications.