Improving Supervisory Effectiveness
Enhancing supervisory impact in AML evaluations. Focused on translating technical compliance into effectiveness. Will provide key enablers, takeaways, and best practices around fines, risk appetite, positive reinforcement, and SupTech to improve FATF supervisory assessments.
About
Status: Started & Ongoing
Description:
Effective supervision is not an exact science and cannot be strictly defined or considered as something that can be taken “off the shelf” and expected to operate effectively, repeatedly, and without many years and cycles of operation. For most countries, it is a journey that starts with legacy regulators and regulations, gradually evolving to reflect AML/CTF global standards, new rules, and coverage of sectors newly subject to regulation.
Over time, regulation and regulatory bodies can move from basic coverage and limited capabilities—focused on licensing, authorisation, supervision, and sanctions—to more effective approaches informed by experience and confidence. This evolution often entails moving from a narrow technical compliance and audit-style approach to one that is risk-based, incorporating a deeper understanding of money laundering and terrorist financing threats and how they are mitigated. In mature systems, regulators can exert positive influence not only on the regulated sector but also on broader AML/CTF stakeholders.
In response to challenges many jurisdictions face in converting improvements in technical compliance into higher effectiveness ratings in FATF assessments, GCFFC experts have identified several success factors—key enablers and takeaways—which, if implemented, could substantially enhance supervisory effectiveness. Drawing from FATF reports, Basel Committee on Banking Supervision (BCBS) insights, and supranational institutions like the EU, as well as the experts’ own knowledge and experience, the group emphasizes practical solutions.
These enablers and takeaways are supported by explanatory notes already published in a consultation paper from October 2024.
Key Deliverables:
Following a consultation period, the published report will be updated and finalized by the GCFFC Annual Meeting in September 2025. The updated report will emphasize:
Whether fines are the most effective response or if better alternatives exist
Enhancements to risk-based sectoral and entity-level assessments
Clarification of AML risk appetite
Approaches for crediting positive contributions
The strategic deployment of supervisory technology (SupTech)