Classification of the banks for purposes of entering foreign currency sale window
Added by as
Ali Mohsen relationship
Since the beginning of this year, the Central Bank of Iraq started to adopt specific weights standards participation banks in selling foreign currency (dollar), this comes after nearly a year of preparation and consultation to develop these standards in their current form, these criteria were given certain comparative degrees total is the final grade for the Bank, which in turn determines the share of foreign currency quantity sold daily.
According to the new system is the Central Bank had placed dollar sale under responds to legal and regulatory requirements and local and international control, and support the principles of disclosure and transparency and reliability, improve the financial system to international practices.
What are the reasons for this rating and what are its criteria and mechanisms identified?
This classification has been adopted in order to achieve a set of legal and economic goals standing in front of them:
1. the international financial system requirements
She has a high risk of money laundering and financing of terrorism to the attention of international organizations to develop national and international rules and procedures to deal with the risks of such operations in order to protect the financial system and society, and is bound by those rules and procedures by States and institutions essential foundation in international relations and financial channels, namely that States and financial institutions from banks or other financial relationships and operations become subject to compliance and application of international norms and conventions, and hook it to the exclusion of entities, States, and put them in the box ban due to the poor Regulations and procedures and its environment, but free (Derisking). International financial institutions are cutting off access to the international financial system to companies and local banks because of the high risks associated with financial crimes.
Meanwhile, as Iraq deals mainly with the dollar coin (as the dollar slipped dinar), that country's foreign transactions effected by this makes Iraq subject to the procedures and rules of trade and the movement of the US dollar by the fed and us Treasury Bank that aims to monitor and investigate the greenback to curb money laundering and the financing of terrorism, and that States (including Iraq) to design rules and procedures and regulations to control the movement of the dollar and identify the paths used and moving from place to Most.
The actions taken by the Central Bank in applying the rules and principles of the fight against money laundering and terrorist financing resulted in Iraq out of the gray area within the classification and assessment of work organization (FATF) on internationally, and Iraq was in danger of falling into the exclusion zone, which means close the ports of the international financial system to Iraq.
That requiring banks to apply the rules of compliance and the Central Bank regulations and instructions as well as the process of link selling dollar commitment, with effective control of all international organizations gave positive messages, resulting in reclassification of Iraq and out of danger the financial embargo.
2. the requirements for the application of the law to combat money laundering and terrorist financing.
Enforce the law against money laundering and terrorist financing obligations on financial institutions which take customer care procedures ranging from customer identification and real beneficiary and indescribable procedures and documentation and transfers. Etc, to develop policies and procedures and precise controls comply with the obligations imposed in the area.
The Central Bank law also mandated as regulatory and oversight authority for financial institutions, as well as its functions develop inspection procedures and methods and standards follow an obligation on financial institutions to help combat money laundering and terrorist financing.
As the dollar-buying and selling operations in financial institutions (banks) basis, which involves important processes in terms of overall size, they require control of compliance rules apply when banks have an obligation to control rules in accordance with the law in terms of checking the sources of funds (JD) and the application of the principle (know your client), and in terms of final uses and intermediate verification to check the integrity and the nature of such operations, the law was assigned to the Governor of the Central Bank put the instructions required for due diligence by financial institutions, and natural The Central Bank monitors compliance with those rules and regulations and the standard basis in the narrow and expanding access to banks buying and selling foreign currency.
The essence of the classification is based on the commitment of the banks rules against money laundering and terrorist financing, under standard (compliance) which includes a number of criteria that are associated with Bank procedures by those rules from all aspects.
3. requirements for upgrading the performance of banks.
The criteria that have been developed represents an important incentive to improve the performance of banks, pushing towards the reorganization of the banking business in regulatory and legal and regulatory framework to avert them risks and enhance living in workers, the Central Bank committed banks to develop modules or sections can contribute to it, such as the Department of combating money laundering and terrorist financing, and manage compliance, risk management, strengthen internal control departments, and apply the principles of corporate governance of strengthening oversight and disclosure and transparency.
Since banks have seen applying entry criteria to take sell a broad spectrum of actions as development units and appoint competent and experienced international auditors appointed, and all that is in the banking sector, upgrading service and provide indicators about the safety of their operations so that they can deal with the outside world and open financial channels with international financial institutions, which have become the indicators give the criteria very carefully.
4. exchange rate stability requirements
Help set standards in supporting the stability of the exchange rate of the local currency which is highlighted the objectives of monetary policy, as the dollar-buying and selling processes on the basis of sound rules would reduce the phenomena of manipulation and speculation and the abolition of intermediaries (who acquired a larger margin of exchange rate difference), has receded dramatically brokers because requiring banks to follow the rules and instructions that become reflected upon the degree of standards and then the Bank's share in the entry window.
In order to achieve the stated objectives had been adopted seven classification criteria for banks to sell foreign currency window. What are these standards and what to select?
Starting it must be noted that this classification is not rated for performance of banks in General (which is mentioned in the bulletin daily sales), but reflects the degree of compliance with the rules on bank operations of buying and selling foreign currency.
The assessment of public banks in terms of the General conditions (performance and efficiency) are on other international standards, notably the international standard (CAMELS) which serves as an early warning to which banks are classified based on the capital asset quality C A, E, M and profitability management, liquidity L and sensitivity analysis of market risk, which is expressed by the number of components of financial indicators, the Central Bank has to make this assessment in 2013 before Office of international scrutiny, given the past For several years, this being re-evaluation and we hope to finish it soon, as it will explain the performance of the banking sector and the efficiency and performance of banks, would be part of the current criteria used in classifying banks for access to the window.
On the classification of banks to enter the window sale of foreign currency it is based mainly on the basis of the Bank's compliance with rules against money laundering and terrorist financing, and help the Central Bank in the framework of the due diligence as well as the legitimate uses of currency transfers abroad, this operation was organized by a number of criteria and mechanisms that could be clarified through the following points:
First: the classification criteria of banks
Seven essential criteria ranking other subset are branched gives each relative weight contributes to determining the final grade for the Bank:
Compliance (compliance with rules and procedures to combat money laundering and terrorist financing) and her weight.
Commitment to help foreign currency window.
Standard dealing with correspondent banks in terms of being supported and categorized.
Bank statements match with correspondent banking statements.
Meet the demands of customers and the number of components included branches.
Lawsuits against the Bank.
Hiring international audit company, takes into account the Bank's establishment date, download the five degrees of the banks that has been established over a year.
Second: review the classification and change
The degrees awarded for banks change continuously according to the Bank's compliance requirements and procedures as checks and inspections conducted by the Central Bank, or by providing proof of Bank improved compliance with one or more criteria, being the Bank periodically reviews all banks, and shares a number of bank services and configurations in the evaluation process according to the type of standard and competence of the circle or the formation, providing credibility and objectivity.
III: transparency rating
The Central Bank provided each bank in degrees granted by each standard according to each element of each standard and gives the Bank the opportunity to object or make notes and High Commission headed by the Deputy Governor and the Bank's advanced staff membership audit observations or objections and interview those involved in the Bank, and can adjust the rating according to what is available from the Bank, note that this door is always open to the Bank at any time feel that it has made progress in applying the rules.
Finally it must be said: the original topic is to achieve effective control and precautionary measures required by Iraqi law and international conventions and obligations upon the membership of relevant international organizations, and to abide by these standards leads to avoid risks of financial crime and financial institutions ports closed in front of the financing of terrorism, and also to raise the Iraqi banking and enable him to build bridges and channels with international financial institutions.
Here we tell some who may be harmed by these actions: they damage will be greater in the event of non-compliance, as non-compliance with the above standards exposed to serious consequences for their work, such as the risk of reputation risk, legal and judicial, and closes them outer handle ports.
The Central Bank is raising its level of international best practices it looks to support by concerned to enable it to perform its role and functions, and to assure everyone that he is ready to accept every note or criticism to be constructive criticism and objective being as institutional channels to preserve the reputation of this institution and its role in the development of the financial system, especially under the financial crisis we are going through and the challenges to economic stabilization in Iraq through fiscal and monetary stability.
Iraqi Central Bank Governor
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