Basel Committee issues final AML risk management guidance

The Basel Committee is the primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision, and practices of banks worldwide with the purpose of enhancing financial stability.

The final guidelines on sound management of AML/CFT risks are intended to enhance the effectiveness of supervision of banks’ AML/CFT risk management, consistent with and complementary to the goals and objectives of the standards issued by the Financial Action Task Force and principles and guidelines published by the Basel Committee.

The revisions set out principles and recommendations for information exchange and cooperation in relation to (i) authorization related procedures of a bank; (ii) ongoing supervision; and (iii) enforcement actions. It also provides possible mechanisms to facilitate such cooperation in the jurisdictional and international context.

New sections described

The revised guidelines include a new section in Part IV (role of supervisors). This new section describes the following responsibilities:

• Supervisors should regularly assess banks’ operational risk management framework by evaluating banks’ policies, processes, and systems related to operational risk.
• Supervisory evaluations of operational risk should include all areas described in the principles for the sound management of operational risk.
• Supervisors should take steps to ensure that banks address deficiencies identified through the supervisory review of banks’ operational risk management framework.
• Supervisors should encourage banks’ ongoing internal development efforts by monitoring, comparing, and evaluating banks’ recent improvements and plans for prospective developments.

Another newly added section to the revised guidelines is Annex 5 (Interaction and Cooperation Between Prudential and AML/CFT Supervisors). “Annex 5 sets out specific principles, recommendations and descriptive examples, to facilitate effective and efficient cooperation in relation to authorization related procedures of a bank, ongoing supervision, and enforcement actions,” the Committee said. “It also describes possible methods of implementation including mechanisms to facilitate such cooperation at the jurisdictional and international level.”

The guidelines are not included in the Basel standards and are only applicable for those jurisdictions that choose to implement them on a voluntarily basis.