Norwegian Financial Supervisory Authority issues thematic review on banks’ management of terrorist financing risk

The Norwegian Financial Supervisory Authority has published a thematic report reviewing how a selection of banks handle terrorist financing risk, based on documentation from seven Norwegian banks and three branches of foreign banks. The review sets out examples of good practice for meeting risk-based obligations under Norway’s Anti-Money Laundering Act across the business-wide risk assessment, customer risk classification and rules in electronic transaction monitoring. The report highlights that terrorist financing risk has important differences from money laundering risk, including a greater focus on transaction destination rather than origin of funds and that small-value transfers can be a relevant indicator. Examples of good practice include making separate and concrete assessments of terrorist financing exposure by product, customer and geography, using external sources alongside internal experience and incorporating emerging risks such as geopolitical developments, cryptoassets and payments via social platforms. These assessments are then reflected in customer risk-scoring factors and in monitoring scenarios and rules designed specifically to detect terrorist financing, including targeted rules for higher-risk destinations, products and customer types such as cash-intensive sectors, credit cards, loans, e-commerce and cross-border transactions.