Better information exchange would improve supervision of anti-money laundering

Out-Law News | 12 Nov 2019 | 3:36 pm | 1 min. read

The Basel Committee on Banking Supervision has proposed new guidelines to improve the supervision of the ways banks tackle anti-money laundering (AML) and countering financing of terrorism (CFT).

The committee said there needed to be adequate information exchange and cooperation between different supervisory functions, regardless of the institutional setting and in both the domestic and cross-border context. In its consultation document, Introduction of guidelines on interaction and cooperation between prudential and AML/CFT supervision (20 page / 309KB PDF) the committee set out principles and recommendations for information exchange and cooperation in relation to the authorisation-related procedures of a bank, ongoing supervision, and enforcement actions.

In proposed revisions to its 2017 guidelines on the sound management of risks related to money laundering and financing of terrorism, the Basel Committee outlined cooperation arrangements between a prudential supervisor and the function responsible for anti-money laundering and countering the financing of terrorism.

It said the exchange of information should not duplicate efforts or impair either supervisor’s independence. Information exchanged should be limited to existing information held by either supervisor, and should follow a risk-based approach.

The guidelines present possible methods of implementation including mechanisms to facilitate such cooperation with a range of descriptive examples and supervisory practices.

The type of information which the committee suggested could be exchanged included banks’ exposure to money laundering and financing of terrorism risks, including information on the jurisdiction where the bank is established.

When authorising a bank, supervisors should consider areas such as its envisaged risk mitigation system, internal control system and governance structures to manage any money laundering or financing of terrorism risks which appear.

According to the proposed guidelines, supervisors will also need to assess major shareholders or acquisitions in the light of money laundering and financing of terrorism risks, and should seek relevant information from the anti-money laundering supervisor as to whether the shareholder or acquirer has been involved in money laundering or terrorist financing.

The committee noted that information held by anti-money laundering or countering the financing of terrorism supervisors “could provide valuable insight for the exercise of prudential supervision”. It identified a number of other types of information that could be relevant for prudential supervisors, such as the topics identified by anti-money laundering supervisors as priorities, site examinations, or supervisory measures.

Information on enforcement actions should also be shared, the committee suggested, bearing in mind any confidentiality issues.

The committee said official channels should be maintained to facilitate the sharing of information as well as ongoing dialogue, and if supervisors are not part of the same regulator, they should consider putting in place an agreement setting out the type of information that could be exchanged, the basis for cooperation and a mechanism to resolve any disagreements.

The proposed guidelines also note that there should be mechanisms to protect whistleblowers’ identities and to comply with data protection provisions.

The consultation is open until 6 February 2020.