Effective Anti-Money Laundering and Combating Financing of Terrorism Measures for Financial Institutions
Strengthening the Fight Against Money Laundering and Terrorist Financing
The [Country] government has issued new guidelines to strengthen its fight against money laundering and terrorist financing. These guidelines aim to ensure that financial institutions comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations.
Responsibilities of Financial Institutions
Financial institutions are responsible for implementing effective AML/CFT programs that meet statutory duties. This includes:
- Understanding risks faced by the institution
- Appointing a Compliance Officer
- Ensuring compliance with statutory responsibilities related to AML/CFT
Senior Management’s Commitment
Senior management is crucial in developing sound risk management programs and keeping directors informed about these programs’ effectiveness.
Policies and Procedures
Financial institutions are required to formally document policies and procedures that cover:
- Customer Account Opening and Verification
- Developing internal policies, procedures, and controls for customer account opening and verification
- Recruitment of staff with appropriate skills and training for AML/CFT compliance functions
- Ongoing training program to ensure adherence to legal and internal procedures and familiarity with the dangers faced by employees
- Business Relations with Third Parties
- Developing internal policies, procedures, and controls for business relations with third parties
- Appointment of a Compliance Officer at an appropriate level of authority, seniority, and independence
- Detection of Unusual and Suspicious Transactions
- Establishing management information/reporting systems to facilitate aggregate and group/branch-wide monitoring
Risk-Based Approach to Customer Due Diligence
Financial institutions are recommended to adopt a risk-based approach to customer due diligence, which would provide them with the discretion to determine the appropriate level of information and documentation required to verify a customer’s identity based on the nature and degree of risk inherent in the customer relationship.
Risk-Based Framework
Each financial institution is required to develop and implement a risk-based framework in its AML/CFT program, which should be approved by its board of directors and appropriate for the type of products offered by the institution. The framework should include:
- Segregation of client relationships by risk categories
- Differentiation of client relationships by risk factors
- Know your customer (KYC) documentation and due diligence information requirements
Periodic Review of Customer Relationships
Financial institutions are urged to periodically review their customer relationships to determine whether any adjustments should be made to the customer risk rating. High-risk customers must have more frequent reviews.
Commitment to Effective AML/CFT Program
Financial institutions are encouraged to demonstrate their commitment to an effective AML/CFT program by adopting these guidelines and ensuring full compliance with local laws, regulations, and guidelines.