Since its inception, the Wolfsberg Group has developed frameworks and guidance for the management of financial crime risks and arguably few have had as big an impact as the Wolfsberg AML Questionnaire. Alan Ketley is the Chair of the Wolfsberg Group’s Standing Committee on the CBDDQ and sat down with Financial Crime News to explain the genesis to its publication and provide an update on progress. Alan Ketley is the Head of Global AML Advisory at MUFG Bank based in New York.
FCN: When was the first correspondent banking due diligence questionnaire published by the Wolfsberg Group?
AK: It was first published in 2004 and was the first attempt to standardise the Correspondent Banking due diligence processes. The questionnaire was originally designed to be used for correspondent banking (using Wolfsberg’s definition) relationships but over time came to be used far beyond its original purpose and by/for various types of financial institutions.
FCN: Why was the updated version needed?
AK: It was published in response to changing industry expectations – many banks had developed their own, proprietary, correspondent banking questionnaires which highlighted the need to overhaul the Wolfsberg AML Questionnaire. When Wolfsberg began the redrafting process in 2016 we approached the topic with some trepidation and a high degree of awareness of the responsibility to the industry and the implications and impact of what would follow especially given heightened expectations in the market and the need to address the decline in correspondent banking relationships.
The new CBDDQ was born from the correspondent banking questionnaires of the 13 Wolfsberg member banks. During the drafting process each question was analysed and refined with effectiveness, usefulness and relevance in mind. Before publication the Wolfsberg Group incorporated the views of other banking industry bodies and comments from major financial centre regulators. Unlike the old questionnaire the CBDDQ covers the complete financial crime programme (AML, Sanctions, ABC and payment transparency) and has greater nuance than its predecessor’s simple yes/no answers.
FCN: When was the revised CBDDQ first published?
AK: The CB-DDQ was launched at Sibos in 2017 and published in February 2018 along with completion guidance, FAQs and public support from FATF, BCBS, CPMI and the FSB. It is designed to set a reasonable (not minimum) standard for higher risk correspondent banking due diligence and to serve as the beginning of a conversation between correspondent and respondent – a conversation whose extent and depth will depend on a combination of the amount of perceived risk involved and the risk appetites of the two banks.
FCN: What are the most recent publications supporting the CBDDQ?
AK: In their support of the CBDDQ the FATF, BCBS, CPMI and FSB asked Wolfsberg to create ‘capacity building’ materials to help enhance awareness by the industry and regulators around the world about financial crime programs. Wolfsberg published these materials in June 2019 and they consist of 13 training videos and an extensive guidance document explaining the areas of risk and concern behind the questions in the CBDDQ. The Wolfsberg member banks will use these materials themselves and encourages their use by anyone with an interest in supporting the development of financial institutions’ financial crime programs all over the world.
As with the CBDDQ, before publication of the capacity building materials Wolfsberg obtained input from other parties – in this case selected public sector entities and banking industry bodies.
FCN: What has been the response to the revised CBDDQ and the supporting materials?
AK: The Industry response to the CBDDQ and the capacity building materials has been largely positive and Wolfsberg is pleased to see a steady increase in the number of banks posting their CBDDQ’s with KYC utilities such as the SWIFT KYC Registry and Accuity’s Bankers Almanac site. Wolfsberg’s aspiration is that the CBDDQ will be used for all higher risk correspondent banking due diligence by the end of 2019 and that the myriad of other bilateral questionnaires be retired.
FCN: How much of a change was the revised CBDDQ from its predecessor?
AK: The contrast between the 28 questions in the old Wolfsberg AML questionnaire and the 110 in the revised CBDDQ initially raised some eyebrows but this overlooks the CBDDQ’s broader scope and the standardisation that it is designed to (re)introduce. Reducing the number of different questionnaires used across the industry should enable the CBDDQ to help control the cost of due diligence and thereby help with the decline in correspondent banking relationships – though arguably a bigger impact will be the suite of the CBDDQ supporting materials that have been published and which pinpoint the key elements of a sound correspondent banking financial crime program.
With the increased length and the expanded coverage of the CBDDQ, respondents completing the CBDDQ will need to spend longer gathering evidence to answer the questions than before, but the benefits here are that this exercise will allow a more holistic assessment by the respondent of its own financial crime related risks and responses and thereby enable both correspondent and respondent to have a clearer and a shared understanding of where gaps or areas for improvement exist. This is a significant benefit to all involved, provided correspondents recognise all financial crime prevention programs are in some way a work in progress.
FCN: What’s your role in all of this?
AK: I volunteered to lead the work of the Wolfsberg Group on the CBDDQ a number of years ago and I chair the CBDDQ standing committee charged with creating and keeping the guidance material up to date and revising the CBDDQ when necessary. The committee also receives questions and suggestions from the industry on interpretation and is currently working on enhancements to the questionnaire and considering suggestions for how it can be expanded. In order to speed and smooth the adoption of the CBDDQ those changes will be minimal in the near term.
FCN: What’s next?
AK: Publication of guidance around the Financial Crimes Compliance Questionnaire (FCCQ) that was published at the same time as the CBDDQ and which was designed to be used for banks and financial institutions outside of higher risk correspondent banking.
FCN: Where can all these materials on the CBDDQ be found?
AK: On the Wolfsberg website see here.
Alan Ketley is a Managing Director and the head of the global AML Advisory function at MUFG Bank in New York. Before joining MUFG in January 2016 Alan spent 13 years in AML at European and US banks in New York and has focused on wholesale products and services such as correspondent banking, documentary trade finance, corporate cash management, prepaid cards, foreign exchange, corporate trust and lending.
Immediately prior to joining MUFG Alan was head of AML and OFAC at the New York branch of a European bank/broker dealer.
Alan joined the world of compliance from sales and relationship management where he held positions managing sales relationships for global correspondent banking services and corporate cash management services provided to banks, multilateral agencies and multinational corporations.
Alan is one of MUFG’s two representatives to the Wolfsberg Group and is the current chair of the Correspondent Banking Due Diligence Questionnaire Steering Committee.