Among other initiatives, banks must ensure that their internal control environment is up to standard and effective; for example, compliance with “Know-Your-Customer” (KYC) requirements must be up to date. Indeed, Botswana banks have vested interest in ensuring effective compliance with both the spirit and principles of the global standards on anti-money laundering and the financing of terrorism.
However, such arbitrage is not costless and therefore not without implications for resource allocation. Interestingly, BIS Review 16/1998  -4-  one reason why the formal capital standards do not include very many risk “buckets” is that regulators did not want to influence how banks make resource allocation decisions.