The Three Lines of Defence Explained: Backbone of AML Compliance

Effectively addressing Money Laundering, Terrorism Financing, and Proliferation Financing risks necessitate a comprehensive strategy. Three Lines of Defence Model is one such strategy. This governance framework forms the backbone of Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), and Counter-Proliferation Financing (CPF) program of a business. Here’s a brief explanation of the Three Lines of Defence:

• The First Line of Defence: This includes frontline employees in charge of conducting day-to-day operations. In the context of AML/CFT/CPF compliance, they are responsible for carrying out customer due diligence, transaction monitoring, and reporting activities.
• The Second Line of Defence: It comprises the Compliance Officer, assisted by the Compliance Team. It is responsible for implementing AML/CFT/CPF policies, procedures, and business controls through its expertise, ensuring adherence to AML/CFT/CPF policies and regulations.
• The Third Line of Defence: It comprises AML/CFT/CPF Audit. Its function is to provide assurance to senior management and other stakeholders. Periodic audits are conducted to identify gaps and provide recommendations to enhance the business’s AML/CFT/CPF policies.

Together, the Three Lines of Defence create a shield of defence to protect a business against ML/TF and PF risks. Our video explains the Three Lines of Defence model. Watch our video for a detailed discussion on the meaning and responsibilities of the Three Lines of Defence in the AML/CFT/CPF program of a business.