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World Council comments on risk-based AML/CFT compliance
BRUSSELS (3/28/14)--The World Council of Credit Unions (World Council) this week
World Council of Credit Unions Vice President and Chief Counsel Michael Edwards at the headquarters of the European Banking Federation in Brussels. (World Council of Credit Unions photo)
recommended ways the Financial Action Task Force (FATF) could limit regulatory burdens on credit unions as part of revisions to its guidance for financial institutions on the risk-based compliance approach (RBA) to anti-money laundering and countering the financing of terrorism (AML/CFT). 

The FATF's changes to the RBA, once finalized, are likely to be incorporated into the U.S. Bank Secrecy Act (BSA) rules within the next year, the World Council predicts.

As FATF works to update its current RBA for banking institutions guidance paper, issued in 2007, the World Council recommends that increasing the detail of that guidance would help increase the clarity regarding when and how it is appropriate to apply risk-based policies for AML/CFT.

World Council made its recommendations during the FATF private sector participation group meeting in Brussels Tuesday and Wednesday. Other topics discussed included AML/CFT issues related to money services businesses (MSBs) and virtual currencies such as bitcoin. World Council Vice President and Chief Counsel Michael Edwards represented credit unions at the FATF meeting.

The FATF's work to update the RBA guidance is intended to make that compliance tool consistent with its also-updated International Standards on Combatting Money Laundering and the Financing of Terrorism & Proliferation document--commonly called the "40 Recommendations."

World Council related that it has become increasingly difficult for credit unions in jurisdictions such as Great Britain and the U.S. to maintain access to correspondent banking services since the FATF's 2012 revisions to the "40 Recommendations" increased the responsibility placed on banks and credit unions for ensuring proper customer due diligence on their customer's customers.  

For example, a bank or corporate credit union providing correspondent services to a credit union now can be held liable for shortcomings in the credit union's customer due diligence/member identification program.

Similarly, a credit union doing business with an MSB can be held liable for problems with the MSB's AML/CFT compliance.

Many larger banks have decided to "de-risk" their operations in the face of these new requirements by curtailing their business relationships with credit unions, smaller banks, trusts, MSBs, and other businesses that handle funds on behalf of consumers or businesses.


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