Key in managing the risks is to identify the sources and assess the extent of its impact to the business. Recognising this importance, The Financial Action Task Force or better known as FATF, has provided a clear statement on this under the very first recommendation in its Revised International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation. Countries, financial institutions and designated non-financial businesses and professions are required to clearly identify, assess,  BIS central bankers’ speeches  1  and understand risks. Understanding of those risks will then set the context for taking actions and allow better allocation of resources to effectively manage and mitigate those risks. To respond to this development, Bank Negara Malaysia has issued revised policies on Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) in September 2013. The integral component of the revised AML/CFT policies is the introduction of an obligation for reporting institutions to adopt a risk-based approach in identifying, assessing, and understanding the money laundering and terrorism financing risks of respective reporting institutions. The risk-based approach is an over-arching requirement that runs through all the other elements in the AML/CFT policies. Proper assessment and understanding of the risks will allow reporting institutions to tailor an appropriate risk controls and establish proper policies and procedures to mitigate the risks. The revised policies also focused on refining Customer Due Diligence (CDD) requirements to reflect the varied risk levels.
The assessment methodology this time around will be different from the previous two assessments. It will not only depend on how good we are in achieving technical compliance to the international standards by having the necessary laws, regulations and policies in place, but importantly, the focus of the assessment will be placed on the effectiveness of AML/CFT measures being implemented taking into consideration the risk and context of money laundering and terrorism financing risks in Malaysia. It is important for me to stress that an overall positive rating in the assessment will strengthen the confidence in our financial system and therefore the country’s economic development. Our success in meeting the shared goal of protecting the integrity of our financial system against criminal abuse will continue to depend on the cooperation among the regulators, the financial industry and the law enforcement authorities. I am sure that this conference will provide a meaningful platform for all of you to engage, and importantly, to strengthen our risk management capabilities and in promoting higher level of integrity in our business conducts and operations. On that note, I wish all of you a fruitful conference. 4  BIS central bankers’ speeches