Page 14 - Monocle Quarterly Journal Vol 3 Issue 2 Spring

MONOCLE QUARTERLY JOURNAL | DEEP LEARNING
or otherwise unethical behaviour through their focus on preventing money laundering, terrorist financing, and tax evasion. Through anti-money laundering (AML) and counter-terrorist financing regulations, banks have
adhered to, and reporting on cases where they are not. This has not always been the case, however. Histori- cally, in most countries, a sectoral model of regulation has dominated the financial sector, resulting in banks being regulated separately from other kinds of financial institutions, such as insurance companies. In 1995, Dr Michael Taylor – an official with the Bank of England – suggested that this model was outdated, given the overlap that was regularly occurring in the work of different regulators. He proposed a “Twin Peaks” structure for regulation in the financial industry: one regulator to oversee prudential regulation – which is concerned with elements such as capital levels and liquidity – and one regulator for ensuring good market conduct and consumer protection – through regulations concerned with AML and counter-terrorist financing, for example. Both of these regulators would be responsible for both banks and other financial institutions. After the 2007/2008 financial crisis, this model was applied in many countries and South Africa is currently in the
process of migrating to the Twin Peaks system.
Banks are no longer
simply institutions where we
keep our money or where we obtain loans, and they
are no longer only responsible for the business of banking.
become responsible for investigating the origin of funds that are transferred through their systems, as well as for flagging suspicious transactions that may be connected to terrorist activities. In addition, regulations such as IT3B, Automatic Exchange, and the Foreign Account Tax Compliance Act (FATCA) aim to reduce the effects of tax evasion, essentially rendering banks extensions of the State, responsible for ensuring that tax laws are
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