Chapter 1: Designing an Effective AML/CFT Supervisory Framework
6 Principles for an Effective AML/CFT Supervisory Framework In addition to adopting a supervision model, policy makers, in establishing and subsequently implementing an effective supervisory framework, need to be guided by a number of principles. The following list is not exhaustive, but reflects the best practices observed in many countries. Supervisors should be • • • • • •
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Granted sufficient independence to be effective, Held accountable, Granted powers to access information, Authorized to make rules, Authorized to impose appropriate sanctions, and Provided with adequate resources. The framework should
• Adopt either a standardized or risk-based approach and • Use both on-site and off-site supervision.
6.1 Independence10 While the organizational structure surrounding AML/CFT supervision may vary from country to country, the AML/CFT supervising authority, whether it is the bank supervisor, the FIU, or some other government agency, must have independence. Unless provisions are already in place to guarantee this, such independence for the AML/CFT supervisor should be made clear in the mandate of responsibilities, possibly with a specific grant of authority. Independence, in general, means that the day-to-day activities of the supervisor are not subject to external direction or control by, for example, the government or by the banking industry. This means that these outside agencies cannot influence particular matters, such as examination decisions or enforcement actions for particular banks. On the other hand, it does not mean that the supervisor’s overall direction and policy cannot be influenced by either the legislature or by government policy makers. In other words, the supervisor is not free to act irresponsibly. Nor does independence mean that the supervising authority should not be held accountable for its actions. Independence should apply to all the different supervisory activities. These include issuing budgets and regulations, exercising enforcement authority, conducting examinations, and setting specific supervisory policies and procedures. Supervisory staff themselves are not independent, but report to the heads of the AML/CFT 15