Explanation:
The Three Lines of Defense model in Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) consists of:
First Line (A): Operational management and staff who implement controls and procedures in daily operations, including employee training programs.
Second Line (B): Risk management and compliance functions that provide oversight and monitoring, such as the AML/CFT chief officer monitoring compliance.
Third Line (C): Internal audit providing independent assurance and evaluation of the effectiveness of risk management and controls.
This framework ensures comprehensive coverage of AML/CFT responsibilities across different organizational functions with appropriate segregation of duties.
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Three Lines of Defense in ML/FT
A
The first line of defence: all banks should implement ongoing employee training programmes so that bank staff are adequately trained to implement the bank’s AML/CFT policies and procedures.
B
The second line of defence: the chief officer in charge of AML/CFT should have the responsibility for ongoing monitoring of the fulfillment of all AML/CFT duties by the bank.
C
The third line of defence: internal audit plays an important role in independently evaluating the risk management and controls.
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