The Financial Action Task Force (FATF) has issued new guidance concerning anti-money laundering (AML) and counter-terrorist financing (CFT) supervision and enforcement.
The guidance reiterates the existing expectation that regulators and supervisors should use a risk-based approach when supervising financial institutions’ compliance with AML and CFT measures.
Guidance on the Risk-Based Approach for Effective Supervision and Enforcement by AML/CFT Supervisors of the Financial Sector and Law Enforcement does not take a “zero failure” or “zero tolerance” approach.
This means that when failures are detected, the regulator or supervisor should apply actions that are appropriate and proportionate, taking into account the nature of the failure.
Regulators and supervisors should also ensure that financial institutions are taking a risk-based approach to implementing AML and CFT measures.
Implementation by financial institutions should be aimed at managing and not avoiding risks according to FATF, which is very clear about its view on wholesale de-banking.
“What is not in line with the FATF standards is the wholesale cutting loose of entire countries and classes of customer, without taking into account, seriously and comprehensively, their level of money laundering and terrorist financing risk and applicable risk mitigation measures for those countries and for customers within a particular sector,” according to a FATF statement.
Guidance on the Risk-Based Approach for Effective Supervision and Enforcement by AML/CFT Supervisors of the Financial Sector and Law Enforcement can be downloaded here.
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