With respect to the decision to grant or refuse a license, law and practice vary, with most jurisdictions requiring the supervisor to provide reasons for denying a license and others reserving the right not to provide any specific reason, usually on public interest grounds. For instance, if refusing a license may disclose sensitive information concerning an ongoing investigation into any person or entity involved in the application that would disqualify them from participating in the institution, then a specific explanation will not be required, or a general explanation may be given invoking public interest grounds. These cases, of course, can be challenged by the applicants. Licenses can also be granted subject to terms and conditions, including regarding AML/CFT issues. One such condition could be to appoint a compliance officer at the management level or to require an independent AML/CFT audit within a specified period after the start of operations. Another condition may be to designate a board member or committee as responsible for dealing with AML/CFT issues.
Adequate Resources to Discharge Its Duties The licensing authority should have adequate regulatory, human, technical, and financial resources to carry out its licensing responsibilities on an ongoing basis. These resources include the capacity to conduct a rigorous fit and proper assessment of all key persons. The regulatory framework for licensing should also provide the licensing authority with the necessary powers and authority to conduct all necessary due diligence on all matters relevant to making informed decisions on the applications. Staff involved in the licensing process should be professional and well trained to carry out their responsibilities.
Application of Licensing Requirements to Changes in Ownership, Control, and Senior Management Positions After all due diligence processes have been completed and the application has been assessed thoroughly, a license can be issued subject to any terms and conditions that the licensing authority may impose. However, under a risk-based approach to supervision, the supervisor or licensing authority should conduct ongoing due diligence on the key players of the institution (significant shareholders, directors, and other key personnel) because their circumstances or characteristics can change, resulting in them no longer meeting the fit and proper requirements (for example, when a director is indicted or convicted of a crime after the license has been approved). The licensing policy should extend to due diligence requirements that arise after licensing. Likewise, if there are changes in ownership and control or if new owners and directors are brought on board, fit and proper due diligence on these persons should be conducted in accordance with licensing requirements.
NOTES 1. 2. 3. 4.
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Financial Action Task Force (FATF) Recommendation 26. Basel Core Principle (BCP) 5. BCP 5, 25. BCP 5, 26–27.
PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING
