Basel Committee Calls For Free Flow Of Information Within Banking Groups

by Ulrika Lomas, for LawAndTax-News.com, Brussels

13 October 2004

In an advisory paper published last week, the Basel Committee on Banking Supervision emphasised the importance of banks' managing their “know-your-customer” (KYC) risks on a global consolidated basis, and provided guidance to banks in this regard.

Urging jurisdictions in which legal impediments remain to the flow of information sharing within global banking groups to remove them, Committee chairman Jaime Caruana noted that:

“Reputation and legal risks have no boundaries, so banks must manage them on a global basis. It is essential that all jurisdictions provide an appropriate legal framework that allows information for KYC risk management purposes to be passed to the head office/parent bank."

"If a bank is unable to access information on customer accounts held in its foreign branches or subsidiaries as a result of insurmountable legal impediments, it should carefully consider whether it wishes to continue to operate in the jurisdictions concerned."

The paper went on to suggest that where KYC rules differ between the head offices and subsidiaries of banking groups, the "higher standard of the two" should be applied.

The Basel Committee on Banking Supervision was established by the central bank Governors of the Group of Ten countries in 1975, and consists of senior representatives from banking supervisory authorities and the central banks of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.

The Committee usually meets at the Bank for International Settlements (BIS) in Basel, where its permanent Secretariat is located.

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