Financial institutions should be required to implement programmes against money laundering and terrorist financing. Financial groups should be required to implement group- wide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes.
Financial institutions should be required to ensure that their foreign branches and majority- owned subsidiaries apply AML/CFT measures consistent with the home country requirements implementing the FATF Recommendations through the financial groups’ programmes against money laundering and terrorist financing.
INTERPRETIVE NOTE TO RECOMMENDATION 18 (INTERNAL CONTROLS AND FOREIGN BRANCHES AND SUBSIDIARIES)
1. Financial institutions’ programmes against money laundering and terrorist financing should include:
(a) the development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees;
(b) an ongoing employee training programme; and
(c) an independent audit function to test the system.
2. The type and extent of measures to be taken should be appropriate having regard to the risk of money laundering and terrorist financing and the size of the business.
3. Compliance management arrangements should include the appointment of a compliance officer at the management level.
4. Financial groups’ programmes against money laundering and terrorist financing should be applicable to all branches and majority-owned subsidiaries of the financial group. These programmes should include measures under (a) to (c) above, and should be appropriate to the business of the branches and majority-owned subsidiaries. Such programmes should be implemented effectively at the level of branches and majority-owned subsidiaries. These programmes should include policies and procedures for sharing information required for the purposes of CDD and money laundering and terrorist financing risk management. Group-level compliance, audit, and/or AML/CFT functions should be provided with customer, account, and transaction information from branches and subsidiaries when necessary for AML/CFT purposes. Adequate safeguards on the confidentiality and use of information exchanged should be in place.
5. In the case of their foreign operations, where the minimum AML/CFT requirements of the host country are less strict than those of the home country, financial institutions should be required to ensure that their branches and majority-owned subsidiaries in host countries implement the requirements of the home country, to the extent that host country laws and regulations permit. If the host country does not permit the proper implementation of the measures above, financial groups should apply appropriate additional measures to manage the money laundering and terrorist financing risks, and inform their home supervisors. If the additional measures are not sufficient, competent authorities in the home country should consider additional supervisory actions, including placing additional controls on the financial group, including, as appropriate, requesting the financial group to close down its operations in the host country.