The mood is to continue cautiously down that path, but to emphasise the need, not only for sound macro-economic policies, which everyone accepts as a sine qua non, but also for steps to accompany capital account liberalisation designed to reduce the risks of volatility. These relate in part to the process of capital account liberalisation, where there is now a good deal more stress on ‘sequencing’ - that is on liberalising potentially more stable, longer-term, capital inflows initially, rather than short-term borrowing denominated in foreign currency. BIS Review 49/1998  -4-  But they relate particularly to three key conditions for living with free capital movements. The first is “transparency”. In a broad sense a need for greater transparency is recognised in relation to public policy, to the relationship between the public and private sectors, to corporate governance, accounting standards, and so on. In a narrower sense there is seen to be a need for more reliable, and greater and more timely disclosure of, financial information generally, at the level of individual borrowing entities, but especially also in relation to countries’ true foreign exchange short-term asset and liability positions. This is especially important in relation to the foreign currency liquidity position of the monetary authorities and of the banking system.
A special Financial Analytical Unit (FAU) has been established as an autonomous part of the Czech Finance Ministry, to which all suspicious transactions must be reported. The regulators of the individual financial market segments, most importantly the Czech National Bank and the Czech Securities Commission, examine the regulated financial institutions’ compliance with the AML Act by means of both off-site and on-site supervision. The home regulators co-operate with the FAU, and also among themselves based on a mutual co-operation agreement. Co-operation with foreign supervisors is being established by signing Memoranda of Understanding. In this respect, the AML activities are  2  BIS Review 40/2003  thus following the same trend as the financial supervision in general. A crucial role is, of course, played in the AML system by the law-enforcement authorities, i.e. the police, prosecutors and judges. In previous years, one of the most sensitive measures in the AML system was the cancellation of the remaining anonymous saving-book accounts, which had a tradition of more than one hundred years in the Czech Republic. This issue, however, has now been resolved, contributing to stricter compliance with international standards in the Czech Republic. I am also pleased to tell you that the most recent progress in this area is the approval of a regulation issued by the Czech National Bank in August 2003 that specifies requirements for banks’ internal AML systems. It is based on the BIS’s “Customer Due Diligence for Banks”.