Global banking regulators are proposing new guidelines for financial firms that aim to ensure they are properly managing their risks of being used for money laundering or terrorist financing.
On Thrusday The Basel Committee on Banking Supervision published for public comment its proposed guidance for dealing with the risks related to money laundering and financing of terrorism, noting that combating these risks is important for “protecting the safety and soundness of banks and the integrity of the international financial system.”
“The inadequacy or absence of sound management can increase the exposure of banks to serious risks, especially reputational, operational, compliance and concentration risks,” the committee says. Indeed, these latest guidelines come in the wake of several large regulatory actions in the U.S. against banks for failures in combating money laundering and observing sanctions against certain countries.
The committee explicitly recognizes these recent scandals, noting that, “Recent developments, including robust enforcement actions taken by regulators and the corresponding direct and indirect costs incurred by banks due to their lack of diligence in applying appropriate risk management policies, procedures and controls, have highlighted those risks. These costs and damage could probably have been avoided had the banks maintained effective risk-based policies and procedures.”
In February 2012, the Financial Action Task Force (FATF) released a revised version of its international standards on combating money laundering and terrorism financing, and the Basel committee says that its proposed guidelines incorporate its recommendations, particularly reflecting the importance of a risk-based approach.
“The committee’s intention in issuing this consultative paper is to support countries’ implementation of the FATF standards with respect to their banks and banking groups, by exploring complementary areas and leveraging the expertise available in both organizations,” it says.
Comments on the proposals are due by September 27.