Follow-up Examinations Follow-up examinations can be conducted any time after an examination has been conducted or enforcement measures have been imposed. Follow-up inspections assess whether an institution has successfully addressed supervisory directives and recommendations for corrective action and whether previously identified deficiencies in the AML/CFT process or violations of AML/CFT requirements have been solved. The timing and focus of follow-up examinations may be determined by the gravity of the deficiencies identified and the resulting recommendations and remediation actions required.
Examination of Foreign Branches and Subsidiaries Some institutions based in one jurisdiction may also have branches and (majority-owned) subsidiaries in other jurisdictions. Hence, the AML/CFT supervisor of the home jurisdiction should have the ability to plan and conduct cross-border examinations of foreign branches and subsidiaries in coordination with their host supervisors. These examinations are intended to verify whether the institution is applying group-wide AML/CFT controls and complying with the requirements of both home and host jurisdictions. Permission from the host jurisdiction is necessary to conduct these examinations and is generally obtained under supervisory memoranda of understanding or similar agreements. Such examinations may be conducted jointly with the host-jurisdiction supervisor. In a cross-border context, home-jurisdiction supervisors should require access to and review of customer and transaction information in the host jurisdiction to test the implementation of AML/ CFT requirements. Access should not be restricted by secrecy or data protection laws or practices, and the home supervisor should observe the protocols for safeguarding the use of confidential information obtained through this process. The host-jurisdiction supervisors should extend their full cooperation and assistance to home-jurisdiction supervisors to enable them to review compliance with group-wide AML/CFT policies, procedures, and controls.
STRUCTURES OF AML/CFT SUPERVISION UNITS There is no preferred institutional arrangement or supervisory model for AML/CFT oversight. In fact, the choice of supervisory model is often influenced by the structure of the financial sector and by legal, cultural, historical, and political economy trade-offs. In practice, the choice of model varies widely across countries. Some supervisory authorities have specialized AML/CFT units in charge of all aspects of AML/CFT supervision. Such a specialized unit conducts AML/CFT on-site inspections separately or jointly with units that focus on other areas of supervision. Other s upervisory authorities have an integrated structure whereby prudential or conduct supervisors perform the AML/CFT component of supervision. In this instance, the AML/CFT component may be examined by the general supervisor or by a supervisor with knowledge and expertise in AML/CFT supervision. A supervisory authority can also have a system with a specialized AML/CFT unit that conducts offsite supervision, shares the results with the prudential or conduct supervision units, and joins those units during on-site inspections conducted specifically to address AML/CFT issues. In some jurisdictions, AML/CFT supervision is conducted by an authority—for example, the financial intelligence unit (FIU)—other than the prudential or conduct supervision authority. In this case, effective cooperation and information sharing between the sectoral and AML/CFT supervisor are essential. Chapter 5: On-Site Risk-Based AML/CFT Supervision
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