BOX 2.4 (continued) For applicants who already operate businesses that will be transferred to a financial institution status, the evaluation also includes an abbreviated on-site assessment as part of OSFI’s exercise to determine operational readiness. Visit to newly authorized institutions: Mexico. The supervisor visits newly authorized financial institutions prior to their start of operations. These visits are comprehensive reviews of all aspects of compliance with AML/CFT regulations, including a fit and proper test of the corporate structure (background of the legal person members), effective customer identification programs, know-your-customer policies, an AML manual (a document containing all relevant AML policies, procedures, and corporate governance schemes according to the applicable legal framework), an AML risk matrix, reporting obligations, and an automated system to detect and report suspicious transactions and currency transactions in a timely manner.
CONSIDERATIONS FOR AN EFFECTIVE LICENSING PROCESS Defining a Licensing Policy A licensing policy should at least address the following issues: ●● Prohibition on the establishment and continuation of shell banks; ●● Prohibition on the issuance of bearer shares by the financial institution, at any level of the ownership structure; ●● Prohibition (or strict controls) on the use of nominee shares and nominee directors that can hide the identity of the ultimate beneficial owners of the financial institution; ●● Prohibition on the use of nontransparent and opaque ownership and control structures for the financial institution; ●● Prohibition on persons who are not fit and proper from holding, or being the beneficial owner of, a significant or controlling interest or holding a management function in a financial institution; and ●● Application of enhanced licensing measures where persons holding, or being the beneficial owner of, a significant or controlling interest or holding a management function are from high-risk jurisdictions or are politically exposed persons. The licensing policy and processes have to take into account the ML/TF risks and AML/CFT compliance measures presented in the licensing application. This licensing policy should take account of different licensing scenarios, such as de novo banks or financial institutions, financial institutions transforming into banks, international banks establishing branches or subsidiaries in the jurisdiction, private entities vs. publicly listed entities, and so forth. Shareholders may be subject to licensing requirements (fit and proper test) when they propose to control more than a certain percentage of an institution’s shares or voting rights (qualifying holdings), as determined by the jurisdiction. The licensing authority may reject applications where a financial institution would be controlled by multiple holding 34
PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING
