authority (or authorities). Where there is more than one possible sanctioning authority, it is important to have effective coordination to avoid applying different levels and types of sanctions for similar offenses. In addition, it is important to avoid the risk of “double jeopardy,” where an institution is sanctioned twice for the same offense. This situation can arise even where only one AML/CFT sanctioning authority is designated but where the prudential supervisor is separate and can also use its prudential supervision powers to apply sanctions for AML/CFT purposes. The nature and range of sanctions themselves should rest on a strong legislative basis, including where the law allows for the publication of sanctions. In some jurisdictions, this basis is found in the financial sector laws, while in others, the AML/CFT legislation itself contains the specific sanctioning provisions. Sometimes, sanctioning powers contained in both types of legislation can be applied for AML/CFT purposes, and it is therefore important to establish policies and procedures for determining which powers will be used and in what circumstances. The legal framework should adhere to the principle of proportionality and dissuasiveness through a range of possible actions, including warning letters, restrictions, cease-and-desist powers, monetary fines, and license suspension and revocation. The legal framework should also allow for an appeal process where there are reasonable grounds for challenging the actions of the sanctioning authority. This process can be administrative (for example, an appeals board) or judicial through the normal court system. It is also paramount that supervisors have operational independence to enforce their decisions. The irrevocability of the supervisory mandate helps to assure this independence, as does the adoption of a regime of legal protections that prevents supervisors from being exposed to any kind of external interference or from being sued for acts performed in good faith in the exercise of their duties. It is, of course, essential to the professionalism and impartiality of the decision-making process that the persons in charge of imposing remedial measures and sanctions are of high professional and ethical standards, skills, and integrity. They should also be subject to strict confidentiality requirements. A jurisdiction needs to have a strong tradition of respect for the rule of law and a framework of good governance. The absence of these elements may compromise the application of sanctions in a fair, consistent, and legal way. Banks and other financial institutions are influential institutions in most jurisdictions and are sometimes owned or controlled by politically exposed persons or their associates. In this environment, the supervisor or sanctioning authority should ensure institutions’ operational independence and integrity.
RANGE OF POSSIBLE SANCTIONS AND REMEDIAL MEASURES The objectives of enforcement measures and sanctions are generally twofold. On the one hand, some measures are aimed at remediation.1 These types of measures instruct a financial institution to remediate the deficiencies within a set time frame. On the other hand, some sanctions, such as fines, are aimed at punishment. Generally, it should be possible to impose both types of sanctions at the same time for the same infringement. The range of sanctions that jurisdictions can impose on noncompliant financial institutions should be as broad as possible. According to FATF guidance, “Supervisory authorities should have access to a range of remedial actions and sanctions that can be applied based on the level and nature of identified deficiencies or gaps in the regulated entity’s AML/CFT controls and risk management system. This range could include warnings, action letters, orders, agreements, administrative sanctions, penalties, fines, and other restrictions and conditions on an entity’s activities that may
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PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING
