On June 27, 2013, the Basel Committee on Banking Supervision (the “Basel Committee”) issued proposed guidelines (the “Proposed Guidelines”) entitled “Sound Management of Risks Related to Money Laundering and Financing of Terrorism,” with the goal of describing “how banks should include money laundering and financing of terrorism risks within their overall risk management.” The Proposed Guidelines are intended to support countries’ implementation of the revised “International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation,” issued by the Financial Action Task Force in February 2012, and merge and supersede two of the Basel Committee’s prior publications on money laundering (“ML”) and financing of terrorism (“FT”) risk management, issued in October 2001 and October 2004.
The Proposed Guidelines outline six “essential elements” of sound ML and FT risk management, including (i) assessment, understanding and mitigation of risks, (ii) customer acceptance policy, (iii) customer and beneficial owner identification, verification and risk profiling, (iv) ongoing monitoring, (v) management of information and (vi) reporting of suspicious transactions and asset freezing.
The Proposed Guidelines focus heavily on customer due diligence procedures, stating that a bank should establish a systematic procedure for identifying and verifying its customers and, where applicable, any beneficial owner(s) or persons acting on behalf of customers. Reliable, independent source documents, data and/or information should be used prior to account opening and before a banking transaction, such as a wire transfer, is carried out on behalf of a non-customer. Additionally, a bank should also have policies and procedures in place to conduct due diligence on its customers sufficient to develop customer risk profiles either for particular customers or categories of customers, based on, for instance, the purpose of a banking relationship, the level of assets or size of transactions, and the regularity and duration of a relationship, in order to detect abnormal activity for a particular customer or customer category and to determine whether such customer or customer category requires enhanced customer due diligence measures and controls.
The Proposed Guidelines also address ML/FT risk management in a group-wide and cross-border context, recommending group-wide information sharing and the consistent application of group-wide policies and procedures that reflect the strictest applicable standard. Additionally, the Proposed Guidelines discuss reliance on a third-parties to perform customer due diligence, specific considerations for correspondent banking, and include recommendations for banking supervisors.
Comments on the Proposed Guidelines are due by September 27, 2013.