OVERVIEW OF THE STEPS TO BE FOLLOWED FOR EFFECTIVE SANCTION PROCEEDINGS This section provides an overview of the principal steps that supervisors or designated authorities should consider taking when there has been a serious breach of AML/CFT regulations and before sanctions, whether disciplinary or administrative, are undertaken. It also describes the basic stages for processing sanctions. These guidelines are based on what are considered best practices; they are not a “one-size-fits-all” solution. They do not address violations of the AML/CFT law punishable by criminal sanctions, which are a matter for law enforcement.
General Neither the FATF recommendations nor the Basel Core Principles provide guidance on the procedures to adopt for the imposition of AML/CFT sanctions. However, the FATF guidance recommends that supervisors consider transparency, consistency, and proportionality in applying remedial actions or sanctions, while taking into account the specifics of the particular entity, the nature and significance of the risk mitigation failures, and the deficiency or gap identified. Each jurisdiction, according to its own legal regime, is responsible for establishing its own procedures. In some jurisdictions, the procedures for preparing and applying AML/CFT sanctions are established by a single authority, which is vested with the power both to monitor AML/CFT compliance and to enforce sanctions. Thus, while there is no single model, as a general principle, each jurisdiction should establish clear policies and procedures before taking any action against a financial institution failing to meet its legal and regulatory AML/CFT obligations. This systematic approach is key to ensuring an effective enforcement regime as well as to safeguarding the rights of offenders. In developing an enforcement policy, supervisors should keep in mind that, in a risk-based approach that gives financial institutions a certain degree of discretion in the application of AML/CFT measures, it might not always be evident that a violation has occurred and what its severity is. Supervisors should therefore avoid a zero-tolerance approach. Too much sanctioning pressure may drive institutions to defensive, rules-based measures, which can eventually weaken the effectiveness of AML/CFT measures Moreover, the national framework and processes for applying sanctions for AML/CFT infringements can determine the efficiency and effectiveness of the sanctioning regime. Where more than one authority is involved and where the supervisory and sanctioning authorities are different, effective coordination of activities is critical. Where this coordination is absent, sanctions may not be applied in a timely manner or at all, possibly giving rise to d isagreement about whether or not to apply sanctions and what type of sanctions to apply, which may cause delays. Another issue to consider where the supervisory authority is different from the sanctioning authority is the potential for political interference and bureaucratic delays in the application of sanctions. Whereas the AML/CFT supervisor (for example, a central bank) may enjoy a high degree of autonomy and adequate resources, the sanctioning authority (for example, a ministry of finance or the FIU) may be more prone to political interference or have fewer resources. These issues may be a source of interagency conflict and friction, which could undermine the effectiveness of the sanctioning regime. 138
PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING
