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  • BAFT Issues Comments on Proposed AML/CFT Guidance Revisions

    Financial Crimes

    On February 22, the Bankers Association for Finance and Trade (BAFT), an international financial services association for organizations engaged in international transaction banking, together with the Institute of International Finance (IIF) issued a letter to the Basel Committee on Banking Supervision (BCBS) with comments on BCBS’ proposed revisions to its risk management guidance related to anti-money laundering and counter-terrorism financing. In the letter, BAFT and IFF note that, while both associations are “particularly pleased with [BCBS’] recognition that not all correspondent banking relationships bear the same level of risk and [BCBS’] acknowledgment of the difference between inherent and residual risk,” they do summarize several areas where enhancements would assist with the “general usefulness” of the final guidance:

    • BCBS should “design guidance that explicitly permits a correspondent bank to rely upon appropriate utilities for the vast majority of cases rather than simply permitting a correspondent bank to use a utility as another source of information supporting the due diligence process” with the purpose of “establishing international standards or sound practices for such utilities to create greater assurance of achieving official ALM/CFT goals.”
    • BCBS should adopt “regulatory practices [that] include standards for ‘verification’ that national authorities could administer or supervise.”

    The “[s]tandardization of information requirements (or templates) for utilities could also be extended to include [the] international standardization of basic due diligence information and ‘enhanced due diligence’ information for higher-risk relationships.” A “basic standardization would give both parties a ground of expectations to build upon in making judgments about how to do business. It could [also] eliminate a degree of unnecessary duplication of effort and costs.”

    Financial Crimes Agency Rule-Making & Guidance International BAFT BCBS IIF Risk Management Anti-Money Laundering Combating the Financing of Terrorism

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  • FSB Releases Status Report Addressing Decline in Correspondence Banking

    Consumer Finance

    On December 19, the Financial Stability Board (FSB) announced the release of a progress report and 2017 workplan to assess and address the decline in correspondent banking. According to the FSB, a decline in the number of correspondent banking relationships is a source of concern for the international financial system because, among other reasons, “it may affect the ability to send and receive international payments, or drive some payment flows underground.” The FSB’s report discusses the FSB’s November 2015 four-point action plan to “assess and address” this concern and highlights actions taken by the FSB over the last five months, including:

    • FSB efforts to collect both bank-level and aggregate country-level data on the number of correspondent banking relationships and aggregated transaction amounts by country and currency for approximately 300 banks in some 50 jurisdictions in order to understand in more detail the scale of withdrawal from correspondent banking, its causes and effects.
    • The Financial Action Task Force (FATF’s) publication of guidance on correspondent banking, which clarifies that the FATF Recommendations do not require financial institutions to conduct customer due diligence on the customers of their respondent bank clients.
    • The Basel Committee on Banking Supervision’s (BCBS’s) publication of a revised version of its guidance on correspondent banking.
    • The hosting of a roundtable discussion amongst the FSB, International Monetary Fund, the World Bank, and officials from central banks, private banks and finance ministries around the world to discuss steps that need to be taken to address this issue.

    The report also includes a discussion of deliverables for 2017, along with general time estimates as to when it expects to complete various tasks. Among other things, the FSB expects to publish the findings from its survey on correspondent banking in April of 2017, the BCBS expects to publish its revised guidance on correspondent banking in June, and FATF expects to release best practices on private sector information sharing and finalize its work on customer due diligence and financial inclusion in July.

    Banking Miscellany Correspondent Banking FSB FAFT BCBS

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