Following industry-wide consultation, in December 2001, the Central Bank adopted comprehensive Guidelines for the Corporate Governance of Banks and Trust Companies Licensed to Do Business within or from within The Bahamas, to which licensees were required to be fully compliant by December 2003. The Guidelines articulate the Central Bank's expectations for the corporate governance of all licensees, and establishes international best practices related to their management and operations. Commencing in 2003, the Boards of Directors of all banks and trust companies licensed by the Central Bank were required to certify that an assessment of their organization's corporate governance and risk management framework was carried out during the year, and accordingly report any material deficiencies in these structures and where appropriate, submit an action plan for addressing them.
Money laundering describes the process to conceal or move assets which would have been obtained or generated by illegal means, with the end of obscuring the link between those assets and the crime. While the development and promotion of policies to combat money laundering has been a long held priority of the international community, in the aftermath of the terrorist attacks of September 11, 2001, such efforts have gained impetus. Particularly as proceeds derived from such activities have on occasion been linked to the financing of terrorist activity. Money launderers generally seek out jurisdictions with the weakest and least effective anti-money laundering systems, and as such, the international focus has been on strengthening national laws and international mechanisms, as they relate to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).
In collaboration with financial institutions, the Central Bank has the duty to promote and maintain high standards of conduct and management in the provision of banking and trust services. Moreover, the Banks and Trust Companies Regulation Act, 2000 directs the Inspector of Banks and Trust Companies to ensure that institutions have in place strict Know-Your-Customer (KYC) rules that promote high ethical and professional standards, and so prevent the use of the institution for criminal purposes. The methodology for Assessing Compliance with AML/CFT Standards as agreed between the IMF, the World Bank and the Financial Action Task Force (FATF), is currently under review by The Bahamas Government.
With the new Basel Capital Accord (Basel II) scheduled for an end-2006 implementation date, developments related to this new capital adequacy framework are being closely monitored by the Policy Unit of the Bank Supervision Department. In 1992, standards established by the 1988 Basel Capital Accord (Basel I), were implemented in The Bahamas and, to date, compliance is monitored by the Central Bank on a quarterly basis, as part of the review of the financial condition. The Central Bank is optimistic about the implementation of Basel II, which comprises three primary pillars: Minimum Capital Adequacy, Supervision Review and Market Discipline. The Bahamas, along with other Caribbean banking supervisors, will be undertaking a quantitative impact study to determine the effects of Basel II on our banking systems.
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