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World Council suggests revisions to international RBA guidance

WASHINGTON (4/17/14)--A comment letter from the World Council of Credit Unions filed Monday with the Financial Action Task Force (FATF) suggests revisions to the international guidance on the risk-based approach (RBA) to anti-money laundering and countering the financing of terrorism (AML/CFT) compliance. The changes would help to promote financial inclusion and to limit regulatory burdens on credit unions and other less complex financial institutions
The World Council comment letter was filed in response to new FATF proposal for the risk-based approach of the banking sector on AML/CFT.

The FATF is currently updating its RBA guidance to better align the guidance with its also-updated International Standards on Combatting Money Laundering and the Financing of Terrorism & Proliferation document--commonly called the "40 Recommendations."  The comment letter follows a recent FATF's private sector consultative meeting on the RBA guidance project held in March at the headquarters of the European Banking Federation in Brussels.
The FATF's changes to the RBA standards, once finalized, are likely to be incorporated into the U.S. Bank Secrecy Act (BSA) rules within the next year, the World Council has predicted.
In the letter, World Council Vice President and Chief Counsel Michael Edwards said the association supports most aspects of the proposal in relation to credit unions, but suggested several revisions to the draft guidance, including:

In both the comment letter and at the recent meeting at the headquarters of the European Banking Federation in Brussels, Edwards said the FATF could limit regulatory burdens on credit unions.

To do so, as part of revisions to its RBA guidance for financial institutions, FATF should increase the detail in its RBA for banking institutions guidance paper thereby increasing clarity regarding when and how it is appropriate to apply risk-based policies for AML/CFT, Edwards said.

  • Limiting AML/CFT compliance requirements for business activities that have lower money laundering/terrorist financing risks;
  • Limited compliance burdens on less complex financial institutions;
  • Allowing flexibility in AML/CFT requirements, such as customer due diligence/know your member rules, in order to promote financial inclusion of unbanked persons; and
  • The concern that some banks may be "de-risking" their customer relationships by ceasing to provide correspondent banking services to credit unions and other types of businesses which handle funds on behalf of members/customers.

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