International Criminal Law
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Committee on Banking Regulations and Supervisory Practices
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observed that the
primary function of banking supervisory authorities is to maintain the overall
financial stability of banks, rather than to ensure that individual transactions
conducted by bank customers are legitimate. Further, national banking supervisory
authorities do not necessarily have the same role and responsibilities in relation to
the suppression of money laundering. In some States, supervisors have a specific
responsibility; in others they may have no responsibility. Nevertheless, the
Committee acknowledged that, as a consequence of the inadvertent association
between banks and criminal activity, public confidence in the banking system could
be undermined and the stability of the system threatened.
The Basle Committee agreed to draft a general statement of ethical principles in
order to encourage banks worldwide to develop procedures to encourage customer
due diligence and to discourage money laundering.
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The Committee recommended
that banks take reasonable steps to determine the true identification of persons
conducting business with their institutions, including those using safe custody
facilities, and should refuse to conduct business transactions with customers who
fail to provide evidence of identity. However, while banks should be encouraged to
co-operate with national law enforcement authorities and should close or freeze the
accounts of persons suspected of depositing money which derived from criminal
activity, the Committee observed that the Statement of Principles was not binding
in international law and its implementation would depend upon national law and
practice. However, the drafting of the Statement demonstrated a commitment to
encourage ethical standards of professional conduct among banks and other financial
institutions. This initiative has been acknowledged by the EU Council as a major
step towards preventing the use of the financial system for money laundering.
Further Committee publications, issued in 1997 and 1999, recommend that banks
develop policies which ‘promote high ethical and professional standards in the
financial sector and prevent the bank from being used, intentionally or
unintentionally, by criminal elements’.
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The Committee also strongly supports the
recommendations of the Financial Action Task Force on Money Laundering (FATF)
relating to customer identification, record keeping and reporting and the need to
take measures to deal with States that do not have effective anti-money laundering
procedures in place. A further publication, issued in October 2001, reinforced the
principles established in earlier publications and provided precise guidance on the
essential elements of ‘Know Your Customer ’ (KYC) standards and their
implementation.
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It warns that without adequate controls and procedures in place
to check customer credibility, banks risked damage to their reputation and might
fail to meet requirements imposed by national anti-money laundering legislation. It
considered that effective KYC safeguards required banks to formulate a customer
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The original committee comprised of banking representatives from Belgium, Canada, France,
Germany, Italy, Japan, Luxembourg, The Netherlands, Sweden, Switzerland, the UK and USA.
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Basle Committee on Banking Supervision,
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