Basel Committee on Banking Supervision supports collective action to halt terrorist funding

The Basel Committee on Banking Supervision has recommended collective action to identify and halt terrorist funding as an integral part of the fight against terrorism. The Chairman of the Basel Committee, Mr W J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York, said: "Bank supervisors in all countries must ensure to the best of their abilities that their banks are not used to finance these heinous crimes".

On 12 March 2002, the Committee endorsed the conclusions which resulted from a meeting in December 2001 of supervisors and legal experts from institutions represented on the Basel Committee. These officials met in Basel, Switzerland to focus on the sharing of financial records between jurisdictions in connection with the fight against terrorist financing. The Committee commended the readiness of the official sector to share information about suspected terrorists with commercial banks. It believes that a close collaboration between the public and private sectors is key to identifying such persons and related organisations.

At its discussion of the outcome of that meeting, the Basel Committee took the following decisions:

(a) Continued efforts should be made to ensure that the standards set out in the Basel Committee's Customer Due Diligence for Banks report (October 2001) are adopted around the world. The Committee believes that a key element in combating terrorist financing is the establishment of a highly effective customer due diligence programme. As described in this document, such a program would consist of thorough customer acceptance and identification practices, ongoing transactions monitoring and a robust risk management programme.

(b) The Basel Committee's Working Group on Cross-border Banking that drew up the October 2001 paper will consider whether it is necessary to issue supplementary guidance concerning issues that arise in relation to terrorist funding.

(c) Supervisors must ensure that adequate systems and procedures are in place to carry out groupwide consolidated risk management for banking groups operating internationally. Information-sharing arrangements should exist to ensure that, in circumstances where the financing of terrorism is suspected, there are formal procedures to notify both home and host supervisors.

(d) The Basel Committee will review the experiences of bank supervisors and other official authorities in the exchange of information about the banking activities of suspected terrorists and terrorist organisations. The intention will be to identify whether further steps need to be taken to ensure effective national and cross-border exchange of information between supervisors and other relevant authorities, especially with regard to home and host bank supervisors and to the treatment of banking groups as single entities for the purpose of sharing information.