Regulatory Alerts2011-08-24 | FPR/DIR/CIR/GEN/01/019 AEXPOSURE DRAFTS OF AML/CFT RISK BASED SUPERVISION (RBS) FRAMEWORK CONSISTING OF AML/CFT RBS MANUAL FOR BANK EXAMINERS' EXAMINATION PROCEDURES;AND AML/CFT RBS REGULATION FOR FINANCIAL INSTITUTIONS
The examination procedures for assessing the adequacy of financial institutions' AML/CFT systems in relation to business entity relationships and cash-intensive businesses involve the following key steps: 1. Review and evaluate the institution's policies, procedures, and processes for managing risks associated with these categories. 2. Examine how the financial institution opens and monitors accounts for business entities and identify whether they assess risk appropriately between different account types. 3. Determine if the institution conducts appropriate due diligence on high-risk customers. 4. Assess the adequacy of the monitoring system in place to detect suspicious activities and file SARs where necessary. 5. Perform a risk-based sampling of business entity accounts, focusing on specific risk factors such as jurisdiction, type of account activity, ownership structure, and usage of multiple bank services. 6. Examine due diligence information on the sampled entities and compare their actual transaction activity with expectations based on the nature and purpose of the accounts. 7. Evaluate whether existing policies, procedures, and processes adequately address the risks associated with cash-intensive businesses and assess how well the institution identifies and monitors these customers. 8. Investigate whether the financial institution's monitoring system is effective in detecting suspicious activities among its cash-intensive clients. 9. Perform a risk-based sampling of cash-intensive businesses, reviewing their account opening documentation and transaction activity to determine if it aligns with expectations based on the nature and purpose of the accounts. 10. Evaluate whether the institution's monitoring processes are sufficient to identify potentially suspicious activity in these high-risk customer segments. By following these procedures, examiners can assess the effectiveness of a financial institution's AML/CFT measures for both business entity relationships and cash-intensive businesses, ultimately helping to protect against money laundering and terrorist financing activities.