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Role of Regulators in Combating Money Laundering and Terrorist Financing

Role of Regulators in Combating Money Laundering and Terrorist Financing. AML Conference for Bank Directors 6-7 December 2006 Transcorp Hilton, Abuja, NIGERIA RUNE GRUNDEKJØN. The last 20 years Criminalization of ML and TF Supervision and Regulation Guidelines and Feedback Sanctions

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Role of Regulators in Combating Money Laundering and Terrorist Financing

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  1. Role of Regulators in Combating Money Laundering and Terrorist Financing AML Conference for Bank Directors 6-7 December 2006 Transcorp Hilton, Abuja, NIGERIA RUNE GRUNDEKJØN

  2. The last 20 years • Criminalization of ML and TF • Supervision and Regulation • Guidelines and Feedback • Sanctions • Cooperation Among Competent Authorities • The Regulators and the Private Sector Rune Grundekjøn, Special Advisor

  3. The last 20 years • Banks are the core protection network • UN • FATF • The Council of Europe • The Basel Committee on Banking Supervision • IMF and World Bank • It started with the banks-- Rune Grundekjøn, Special Advisor

  4. Criminalization of ML and TF • FATF • Recommendation 1 • Countries should criminalise money laundering on the basis of United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988 (the Vienna Convention) and United Nations Convention against Transnational Organized Crime, 2000 (the Palermo Convention).--------etc Rune Grundekjøn, Special Advisor

  5. Criminalization of ML and TF • FATF • Special recommendation 2 • II. Criminalising the financing of terrorism and associated money laundering • Each country should criminalise the financing of terrorism, terrorist acts and terrorist organisations. Countries should ensure that such offences are designated as money laundering predicate offences. • Implementation: • Every country must find it way based Rune Grundekjøn, Special Advisor

  6. Supervision and Regulation • FATF • Recommendation 23 • Countries should ensure that financial institutions are subject to adequate regulation and supervision and are effectively implementing the FATF Recommendations. Competent authorities should take the necessary legal or regulatory measures to prevent criminals or their associates from holding or being the beneficial owner of a significant or controlling interest or holding a management function in a financial institution. Rune Grundekjøn, Special Advisor

  7. Supervision and Regulation • Recommendation 23: • not be read as to require the introduction of a system of regular review of licensing of controlling interests • but as to stress the desirability of suitability review for controlling shareholders in financial institutions (banks and non-banks in particular) from a FATF point of view Rune Grundekjøn, Special Advisor

  8. Supervision and Regulation • Using an intermediary for criminal purposes is not just limited to money laundering activities: • It strikes to the very heart of banking activities • Important to prevent the dishonest intermediares Rune Grundekjøn, Special Advisor

  9. Supervision and Regulation • Recommendation 23 • Where shareholder suitability or “fit and proper” tests exist, the attention of supervisors should be drawn to their relevance for anti-money laundering purposes. • Important: • Transparency of the ownership structure, the reputation of the directors • Internal controls Rune Grundekjøn, Special Advisor

  10. Supervision and Regulation • The FATF mutual evaluations – • Ratings linked to regulation and supervision • What is the problem • Weak points from different countries • Examples from reports • What can be done to improve the work Rune Grundekjøn, Special Advisor

  11. Supervision and Regulation • Inspections and visits: • Offsite visit • Onsite visit • Important tool • Many countries have ML/TF on the agenta during all the onsite visits • In addition inspections focusing solely on ML/TF Rune Grundekjøn, Special Advisor

  12. Supervision and Regulation • Onsite visits: • How to choose the institutions subject to inspection • Prior to the visit • The team from the Supervisory Authority • The spot checks • How much in detail? • The communication with the bank: • written and oral • The right level, Board, AML officer etc Rune Grundekjøn, Special Advisor

  13. Supervision and Regulation • RESOURCES • Recommendation 30 • Countries should provide their competent authorities involved in combating money laundering and terrorist financing with adequate financial, human and technical resources.  Countries should have in place processes to ensure that the staff of those authorities are of high integrity. Rune Grundekjøn, Special Advisor

  14. Guidelines and Feedback • Recommendation 25 • The competent authorities should establish guidelines, and provide feedback which will assist financial institutions and designated non-financial businesses and professions in applying national measures to combat money laundering and terrorist financing, and in particular, in detecting and reporting suspicious transactions.  Rune Grundekjøn, Special Advisor

  15. Guidelines and Feedback • Interpretative Note to Recommendation 25 • When considering the feedback that should be provided, countries should have regard to the FATF Best Practice Guidelines on Providing Feedback to Reporting Financial Institutions and Other Persons. Rune Grundekjøn, Special Advisor

  16. Guidelines and Feedback • From the mutual evaluation reports: • Private sector asking for more specific and tailored guidelines • Some coutries have no guidelines at all • Lack of guidelines in main areas • Lack of feedback in time • The relationship between guidelines from the Regulator and guidelines from the FIU Rune Grundekjøn, Special Advisor

  17. Guidelines and Feedback • The importance of guidelines and feedback: • Information • Learning and training elements • Motivation for the private sector • Avoid wrong practice • We all need feedback • The supervisor should not go into every single detail – the risk based approach • The institutions are responsible for their own activities – not handle it over to the supervisor Rune Grundekjøn, Special Advisor

  18. Guidelines and Feedback • From FATFs report on Australia: Rune Grundekjøn, Special Advisor

  19. Guidelines and Feedback • From FATFs report on Denmark (Rec 25 Non Complient) Rune Grundekjøn, Special Advisor

  20. Guidelines and Feedback • From the FATF report on Iceland, Rec 25 (Non complient) Rune Grundekjøn, Special Advisor

  21. Sanctions • Recommendation 17 • Countries should ensure that effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, are available to deal with natural or legal persons covered by these Recommendations that fail to comply with anti-money laundering or terrorist financing requirements. Rune Grundekjøn, Special Advisor

  22. Sanctions • Recommendation 29 • Supervisors should have adequate powers to monitor and ensure compliance by financial institutions with requirements to combat money laundering and terrorist financing, including the authority to conduct inspections.  They should be authorised to compel production of any information from financial institutions that is relevant to monitoring such compliance, and to impose adequate administrative sanctions for failure to comply with such requirements. Rune Grundekjøn, Special Advisor

  23. Sanctions • It is important to have in mind the purpose with the sanction regime – make the system work • Can be different from country to country • Based on international standards and national traditions Rune Grundekjøn, Special Advisor

  24. Sanctions • Question for the conference: How is it possible to both cooperate with the private sector and use sanctions at the same time??? Rune Grundekjøn, Special Advisor

  25. Sanctions • Examle of sanctions from the Supervisory Authority according: • Written warnings • Comments from the FATF reports Rune Grundekjøn, Special Advisor

  26. Cooperation among competent authorities • Recommendation 31 • Countries should ensure that policy makers, the FIU, law enforcement and supervisors have effective mechanisms in place which enable them to co-operate, and where appropriate co-ordinate domestically with each other concerning the development and implementation of policies and activities to combat money laundering and terrorist financing.   Rune Grundekjøn, Special Advisor

  27. Cooperation among competent authorities - internationally • INTERNATIONAL CO-OPERATION • Recommendation 35 • Countries should take immediate steps to become party to and implement fully the Vienna Convention, the Palermo Convention, and the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism etc Rune Grundekjøn, Special Advisor

  28. Cooperation among competent authorities • The cooperation between public and privat sector is very important: • The same team – but different roles Rune Grundekjøn, Special Advisor

  29. rune.grundekjon@kredittilsynet.no • www.kredittilsynet.no • FATF: • http://www1.oecd.org/fatf/ • Council of Europe: • http://www.coe.int/DefaultEN.asp • UN: • http://www.un.org/ Rune Grundekjøn, Special Advisor

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