World Council Comments on Revisions to AML Risk-Based Approach, Virtual Currencies
World Council engages the Financial Action Task Force on upcoming revisions to its risk-based approach to anti-money laundering compliance, money services businesses and virtual currencies such as bitcoin
March 26, 2014
The FATF is working to update its current RBA for banking institutions guidance paper, issued in 2007, to be consistent with its updated International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, better known as the "40 Recommendations" for AML/CFT, released in February 2012. As part of this consultation, World Council filed a comment letter in January in response to a series of high-level questions posed by the FATF about the RBA, and made oral comments in response to the FATF's draft revision of the 2007 guidance at the Brussels meeting this week.
World Council's comments focused on limiting regulatory burdens on small and medium financial institutions, as well as helping credit unions maintain access to correspondent banking services. It has become increasingly difficult for credit unions in jurisdictions, such as Great Britain and the United States of America, to maintain access to correspondent banking services since the FATF's 2012 revisions to the 40 Recommendations because of the increased responsibility those changes placed on banks and credit unions for ensuring proper customer due diligence on their customer's customers.
For example, a bank or central 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.
Other topics discussed at the FATF consultative meeting included possible revisions to the FATF's guidance on MSBs issued in 2009, and possible future guidance on AML/CFT compliance regarding virtual currencies such as bitcoin.
Although a FATF guidance paper issued last summer touched upon the virtual currency AML/CFT issue and the United States' Financial Crimes Enforcement Network (FinCEN) issued guidance regarding virtual currencies in March 2013 and January 2014, many other jurisdictions, including most U.S. states, have not yet clarified how their AML/CFT and other regulatory requirements apply to virtual currency exchanges and administrators. Bitcoin exchanges in particular have been interested in doing business with credit unions in order to have access to wire and automated clearing house systems to settle sales of bitcoins with traditional currency, but the lack of regulatory certainty regarding AML/CFT compliance and licensure for virtual currency operators has made this difficult.
"Because they are membership-based organizations, credit unions tend to operate with less risky members and lines of business than other, for-profit financial institutions," said Brian Branch, World Council president and CEO. "We believe that World Council's advocacy efforts regarding AML/CFT compliance will have a tangible and positive impact on credit union operations worldwide, both in terms of reducing regulatory burdens and in terms of helping all credit unions maintain access to correspondent banking services."
World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.
World Council has implemented 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 235 million people. Learn more about World Council's impact around the world at www.woccu.org.
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