The Basel Committee on Banking Supervision (BCBS) sets global standards for bank governance and states that the Board of Directors plays a critical role in AML oversight.
Option D (Correct): The Board is responsible for:
Establishing and approving the AML compliance function.
Ensuring the compliance function has adequate authority and resources.
Overseeing risk management efforts and policies.
Option A (Incorrect): The Board should be actively involved, not just informed when required.
Option B (Incorrect): The compliance function must have direct access to the Board to ensure independent oversight.
Option C (Incorrect): The Board must be involved in policy establishment for effective compliance management.
Why Board Oversight is Critical:
Ensures effective AML governance and accountability.
Reduces regulatory risks and potential financial penalties.
Strengthens financial institution stability and reputation.
Best Practices for Board Oversight in AML Governance:
Establish independent compliance reporting lines to the Board.
Ensure regular AML risk assessments and policy reviews.
Mandate regular AML training for senior management.
Reference:
Basel Committee on Banking Supervision (BCBS) Corporate Governance Principles FATF Recommendation 18 (Internal Controls and Board Oversight) Wolfsberg Group AML Risk Management Framework