Improvement of effectiveness and efficiency of the Counter-Terrorism Financing (CTF) system by approval of the Risk Based Supervision (RBS) in the sector of Financial Institutions (FIs)

دانشنامه حقوق اقتصادی

Article 9, Volume 27, Issue 17, June 2020, Pages 217-240   

Document Type: Scientific research

DOI: 10.22067/le.v27i16.86673

Author

Naser Ghasemi^*

Associate Professor of Department of Criminal Law and Criminology University of Judicial Sciences and Administrative Services of Tehran

Abstract

Introduction
Supervision of financial institutions, especially banks, in terms of implementing anti-terrorist financing laws and regulations is one of the most important issues highlighted in international instruments, and countries should work to improve the effectiveness and efficiency of the system.
There are various methods for supervising financial institutions, the most famous of which are the adaptive method and the risk-taking method. The adaptive approach, or the "one rule for all" approach, means that observers must inspect all of their supervised entities equally and use the same tools and make specific and similar decisions to break a rule. but, in a risk-based or risk-based approach, the amount of oversight is determined by the extent to which a financial institution is threatened and vulnerable. Achieve the goal of managing and reducing terrorist financing risks. In other words, in this approach, achieving this goal replaces by ensuring compliance with the law in financial institutions.
The implementation of this strategy requires the establishment of legal bases and the implementation of executive measures; Therefore, on the one hand, the purpose of this study is to assess the feasibility of implementing a risk-based monitoring strategy in the light of the legal principles accepted in Iran's legislative criminal policy and on the other hand, to assess the effectiveness and efficiency of the executive criminal policy of the Islamic Republic of Iran. In the field of supervision of financial institutions, this has been tried to achieve it by descriptive method.
Methodology
The research is descriptive-analytical.
Conclusions and suggestions
In the legislature, regulators have no obligation to use risk-based methods and their decisions are not well supported. Existing performance guarantees, in addition to not being sufficient, are merely aimed at violating the prescribed rules. The supervisors have not been given the necessary authority, especially to enforce disciplinary guarantees in the event of violations of anti-terrorist financing regulations.
In the field of executive criminal policy, a review of the instructions and procedures shows that in the market entry stage, it is sufficient to inquire only about criminal records; While, firstly, not all criminals are convicted, and secondly, criminals typically use covert means to obtain a license and keep their identities secret. In the field of periodic inspections, the need to provide information alone is not enough and there is no responsibility for supervisors to create a risk profile and provide a clear correction plan. The guidelines issued so far also promote a more law-abiding approach and focus on enforcing anti-money laundering regulations; Although these provisions are largely similar to those of terrorism financing, specific provisions on terrorist financing, such as how to seize terrorist assets and identify suspicious terrorist financing operations and transactions, have not been considered.
 Accordingly, in order to improve the effectiveness of Iran's criminal policy in relation to the financing of terrorism, in the first place, the issue of legal principles, especially the obligation of supervisors to use risk management methods, and violation of their decisions should be accompanied by heavy enforcement guarantees. Then, in the executive field, first, by measuring the risks of financing terrorism, applicants for obtaining a license for financial and non-financial activities should adopt an efficient method to prevent criminals and their associates from entering the financial markets; second, a national risk assessment must be conducted to ensure that regulators' information resources are largely adequate. Third, the necessary steps, such as creating a risk profile and drawing up a correctional plan for supervised entities by supervisors in each of the financial areas, must be taken. Fourth, violations of the correctional program must be addressed by disciplinary action by supervisors and the guarantee of administrative and judicial enforcement by the judiciary and related nstitutions. Fifth, guidance documents should be prepared and published in the field of detecting suspicious transactions and operations, as well as anti-terrorist financing regulations.
 

Keywords

Risk Based Supervision (RBS); Supervision; Counter-Terrorism Financing (CTF); criminal policy

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