Consolidated Supervision : RBA Tool - Module 4 : The Practice

Overview & Synopsis

This document constitutes Module 4 of the World Bank Group's Risk-Based Approach (RBA) Tool series, focusing on the consolidated supervision of financial groups in the context of AML/CFT compliance. Drawing on international standards, principally FATF Recommendations 18, 26, and 40, and Basel Core Principles 12 and 13, it provides supervisory authorities with a practical framework for overseeing financial groups on a worldwide, consolidated basis. The module opens with a snapshot of South Africa's financial sector landscape, encompassing banks, insurers, financial service providers, and retirement funds, to ground the discussion in a concrete jurisdictional context. It then delineates the respective roles and responsibilities of home and host supervisors: home supervisors oversee the parent entity and its global operations, while host supervisors focus on foreign branches and subsidiaries operating within their jurisdictions. A central concern of the module is the requirement for financial groups to implement group-wide AML/CFT programs, including robust internal policies for information sharing across subsidiaries and foreign branches. Where host country standards are less stringent than those of the home jurisdiction, financial groups are expected to apply the higher standard, thereby preventing regulatory arbitrage that could create compliance gaps. The module emphasizes the mechanics of supervisory coordination, both domestically and internationally. It examines the use of supervisory colleges, Memoranda of Understanding (MoUs), joint examinations, and formal information-exchange arrangements as essential instruments for effective consolidated oversight. Licensing procedures for foreign financial institutions, including the requirement for a Statement of No Objection from the home supervisor, are also addressed. Overall, the module reinforces that effective consolidated supervision is not achievable in isolation: it demands sustained collaboration between home and host authorities, mutual access to information, and alignment around the shared objective of FATF Immediate Outcome 3, ensuring that financial institutions and Virtual Asset Service Providers (VASPs) are appropriately monitored for AML/CFT compliance commensurate with the risks they present.