Whereas prudential supervision originally was limited to quantitative, economic aspects, it has gradually extended to cover qualitative aspects, such as ensuring that financial institutions, their management and their shareholders, are fit and proper. Various international instruments have emphasised the role financial and credit institutions can play in the fight against money laundering. The Statement of Principles issued by the Basle Committee in 1988 had already warned that supervisors could not remain indifferent to the use made of banks by criminals. The FATF underlined the importance of supervisory authorities in the implementation of money laundering measures and asked for prudential supervision to be extended to cover non-bank financial institutions. The close nexus between the definition of the application field of the ratione personae of preventive legislation and prudential supervision has already been underscored at the beginning of Part 2 but it is clear that the effective functioning of a suspicion-based reporting system is – to a much greater extent than a threshold-based reporting system – dependent on thorough bank supervision.

Whereas supervisory authorities have a wide range of options to hand with which to fight money laundering (as exemplified by Article 17 of the CICAD Model Regulations), their main tasks in combating money laundering are twofold. First, they can inform the authorities responsible for combating money laundering (i.e. the FIUs) of any money laundering operations they may detect in the course of their supervision activities. In addition, they have mostly administrative powers to punish financial institutions that have failed to observe anti-money laundering rules.

The duty of supervisory authorities to report facts of money laundering

In its recommendations 26 and 27 the FATF asks that supervisory authorities co-operate with judicial and police authorities.