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The World Bank
Supervision of Banking Sector on AML/CFT
- Introduction to the Workshop -
SB KohSr. Financial Sector Specialist
Financial Market Integrity
Overview of Workshop
Why Supervision Matters (Background)
Weak Compliance in Financial Sector
Issues Related to Banking Supervision
1) On-site vs. Off-site Supervision
2) AML Compliance and STR
Reporting/Analysis
3) Enforcement and Sanctions
4) National/International Cooperation
5) New Issues – Mobile Banking
Group Exercises/Presentation/Wrap-up Discussion
Why Supervision Matters (Background)
Banks are gatekeepers of financial system.
Banking supervision is important.
→ The industry needs guidance and directions from the supervisors.
→ An effective AML/CFT supervisory and sanctioning system is critical.
FATF Recommendations emphasize
regulation & supervision
Weak Compliance in Financial Sector
Supervisory compliance is generally lower than the
average of all recommendations.
Few Countries rated as Largely and Fully Compliant.
→ R17 (Sanctions), R23 (Regulation & Supervision), R25
(Effective Guidelines) are all below the average of 42%.
→ R5 (CDD) is only 10.4%.
► Session 2(a) : Key findings on AML/CFT supervision
from MERs/DARs <Presenter : APG>
Weak Compliance in Financial Sector
0%
20%
40%
60%
80%
100%
R5 R17 R23 R25 R29 R30 R32Co
un
trie
s L
arg
ely
or
Fu
lly
Co
mp
lia
nt
R32: Stats
Average= 42%
R17: Sanctions
R23: Regulation & Supervision
R25: Guidelines
R29: Supervisory Authority
R30: Resources
R5: Due Diligence
Issues on Banking Supervision
I) Off-site vs. On-site Supervision : How to improve current weakness
Off-site supervision is a powerful means for effective AML/CFT implementation.
– Off-site supervision is ongoing and covers entire banking industry.
helps ensure the same level of AML/CFT system across the banks
(critical as money launderers and terrorist financiers tend to shop for the most lenient financial institution)
The emphasis tends to be more on On-site Supervision.
- The most effective tool to assess compliance with AML/CFT requirements
- Analysis of AML/CFT policy and procedures, need to be complemented by sample testing
► Session 2(b) : Main challenges for off-site, on-site Supervision <Presenter : WB>
► Session 4(a) : Off-site Supervision <Presenter : IMF>
► Session 4(b) : On-site Inspection Tech.
<Presenter : IMF>
Issues on Supervision (Cont’d)
Issues on Supervision (Cont’d)
2) AML Compliance & STR Reporting/Analysis
: Raising Skills of Banking Supervision
It is essential to have clear policies on STR reporting.- Identification of suspicious transactions
→Role of frontline staff/compliance unit is important.- Reporting of suspicious transactions
→ Procedures and responsibilities must be examined.
But, in many cases, shortcomings are identified later by off/on-site supervision.
► Session 5 : AML Program Weaknesses and STR
Analysis <Presenters : US Treasury/WB>
Issues on Supervision (Cont’d)
3) Enforcement and Sanctions : Making Them Work
A suitable sanctioning is essential for effective supervision.
The nature of the sanction varies according to legal regime/particular circumstances.
- But, it should be effective / dissuasive / proportionate.
► Session 6 : Enforcement and Sanctions
<Presenters : US Treasury/WB>
► Case Studies for Sanctions <Presenter : WB>
Issues on Supervision (Cont’d)
4) National/International Cooperation: Ways to Enhance
Both domestic/international cooperation are essential.- Failing to cooperate is one of the main reasons for
a country’s AML/CFT framework failing or being ineffective.
Domestic Cooperation involves
- Public, public-private, private sector cooperation International Cooperation involves
- Supervisory/Law enforcement agencies, FIU
► Session 9 : National/International Cooperation
<Presenters : WB/IMF, Countries>
Issues on Supervision (Cont’d)
5) New Issues – Mobile Banking : How to Regulate It
Mobile banking financial services
- Booming in developing countries
- Require higher level of expertise, and capacity to assess risk in new channels for money transfers
► Session 10 : New Challenges for Supervisors: The Case of Mobile Banking <Presenter : WB, Country experiences>
Group Exercises/Presentation/Wrap-up
1) Sessions 7, 8, 11 and 12 : Group Exercises
- Group Exercise on Effective Sanctioning (7 & 8)
- Group Exercise on Mock Inspections (11 & 12)
2) Session 13 : Presentation
- Findings of Group Exercises on Mock Inspection
- Country Experiences with Off/On-site Supervision
3) Session 14 : Wrap-up Discussion
Thank you!