Chapter 1: Designing an Effective AML/CFT Supervisory Framework
This model has a number of benefits. First, because collection of information and analysis are the core of its duties, the FIU has expertise in certain AML/CFT matters. Second, AML and CFT are its only responsibilities. Third, the FIU has direct access to suspicious transactions reports (STRs) and related information. According to FATF Recommendation 26, the FIU should have timely access, directly or indirectly, to the financial, administrative, and law-enforcement information required for it to undertake its functions properly, and these include the analysis of STRs. This model also presents several drawbacks. If the FIU is the supervisor, it may well be inexperienced both in financial inspections and in bank supervisory matters. As well, the FIU is not likely to be sufficiently well equipped to undertake AML/CFT supervision on an enterprise-wide basis. On the other hand, if a body other than the FIU is the supervisor, that body may well not have access to STR information. Examinations are likely to become more limited in scope and expertise, and multiple regulators and different approaches to compliance supervision may generate some confusion for banks.
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5.3 Supervision Shared between the FIU and the Bank Supervisor The third model is to have AML/CFT supervision responsibilities shared between the FIU and the bank supervisor (see box 1.2). This model has one important potential benefit. Because it may well facilitate the sharing of personnel, information, expertise, and other resources between the two entities, the overall quality of AML/CFT supervision should eventually be enhanced.
BOX 1.2
Example of Shared Supervision
In Canada, the FIU (FINTRAC) retains accountability for ensuring compliance, but the OSFI (the federal banking/insurance regulator) carries out day-to-day AML/CFT assessments. OSFI and FINTRAC are authorized to share information with each other on entities regulated by OSFI that are subject to the Canadian AML requirement. To operate this authority, OSFI and FINTRAC have entered into a memorandum of understanding laying out precisely which information each will share with the other. OSFI and FINTRAC meet regularly to discuss the results of OSFI’s work and FINTRAC’s analysis of STR and other filings made by OSFI-supervised entities. The arrangement ensures that duplication of effort is avoided and also provides a forum for discussing emerging AML supervisory issues to ensure that both agencies form a broad and shared view of acceptable risk management practices.
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