The model used is often informed by the availability of supervisory resources, including s pecialized skills, as well as by the size and complexity of the sector. All models have advantages and disadvantages. However, in any model, clear objectives and a mandate, AML/CFT supervisory knowledge and expertise, a high degree of operational and financial independence, adequate supervisory resources, and effective enforcement powers are essential. Jurisdictions that have designated the AML/CFT supervisor outside of the sectoral supervisory authority and those that have created specialized AML/CFT supervisory units within the sectoral supervisory authority should pay attention to coordination between the two authorities or units. In jurisdictions with an integrated structure, equal attention should be paid to AML/CFT supervision, and adequately experienced staff should be available for AML/CFT oversight. The staffing of on-site examinations depends on several factors, including how the AML/CFT supervision function is organized within the supervisory authority. Irrespective of how AML/CFT supervision is organized, on-site examinations should be conducted by supervisors with a robust understanding of possible ML/TF risks and AML/CFT issues. They should also be knowledgeable about the AML/CFT legal framework and its interpretation.
PLANNING AND SCOPING RISK-BASED AML/CFT ON-SITE EXAMINATIONS Examination Notification Supervisors generally notify management in advance of a proposed examination. This notification informs the institution of the scope and purpose of the examination, the dates of the examination, the documents and information that will be required, and the meetings that will be held with management and staff. Part of the notification will be a request for information, such as business-wide ML/TF risk assessments, AML/CFT policies and procedures, and compliance monitoring and audit reports for examiners to analyze before the on-site visit. The advantage of prior notification and the request for information is that the institution has time to prepare all of the necessary information in advance and to arrange for the appropriate staff to be available for the examiners to interview. This preparation facilitates the examination process. An alternative approach is to conduct an unannounced inspection, in which examiners do not provide prior notice that an inspection will occur. This approach is generally used when there are indications of violations of AML/CFT obligations or reasonable grounds to suspect that the institution, including any of its managers and staff, is involved in illicit activities. In such cases, advance notice may not be appropriate because the supervisor wants to safeguard evidence. In this case, of course, the institution will not have prepared any information, and key staff may not be available immediately. Surprise examinations are an important tool that should be at the supervisor’s disposal. Although prior notice is recommended in most cases, it should not be binding on the supervisors, and institutions should be aware that prior notice is at the discretion of the supervisory authority. In addition, while inspecting an institution, supervisors can always make surprise visits to its departments or branches and conduct surprise interviews with staff. Surprise examinations can be more difficult to organize in the case of cross-border on-site visits, when home supervisors decide to inspect a branch in a host jurisdiction. In that case, the host supervisor may have a different practice in relation to examination notification. 100
PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING
