Rather, its implementation has been motivated by the perception that the dynamics of some financial prices or ratios are indications of vulnerabilities in all or part of the financial system that could create problems upon the occurrence of one or more shocks. Therefore, many of the tools used are intended to directly restrict or limit the growth of certain financial ratios or aggregates. I will next review these tools in more detail. 2. Macroprudential tools and their use  As I mentioned earlier, in its quest to reduce the vulnerabilities of the financial system, macroprudential policy has made use of multiple tools in different countries. After several years in place, it has provided some evidence on its frequency of use and its effectiveness. A host of different macroprudential policies have been identified across countries. A possible classification of them (based on Claessens et al., 2013) identifies four groups, according to the nature of their objectives. One group considers measures aimed at reducing vulnerability of borrowers, with caps to Loan-to-value and Debt-to-income chief among them. A second group covers measures that reduce –directly or indirectly – credit growth, where the instruments here are Caps on Credit Growth, Reserve Requirements, Dynamic Loan Loss Provisioning, and Countercyclical Capital Requirements. A third type of policy aims to limit foreign currency risks via Limits to Foreign Currency Lending; while a fourth type considers measures aimed at improving bank buffers, with the policy of Restrictions on Profit Redistribution being implemented in different latitudes.

Banks that deal with corrupt PEPs expose themselves to risk of bad publicity, legal action and possible financial loss;  •  other types of private banking customer - particularly from those jurisdictions where the risk of money laundering is severe or whose business makes them more susceptible to money laundering;  •  correspondent banks - particularly those from NCCTs or other high-risk jurisdictions where there are doubts about compliance with FATF standards. Specifically, AIs should beware of  BIS Review 47/2002  3  so-called “shell banks”, which operate without a physical presence in their place of incorporation; and •  corporate vehicles of various types - including offshore companies and trusts where the objective may be to disguise the beneficial ownership. Business introduced by intermediaries Even with a risk-based approach, the process of identification and verification is an onerous one. It is natural therefore that AIs may wish to rely on the due diligence procedures undertaken by intermediaries who introduce business to them. However, experience has shown that this can expose institutions to risk if the intermediaries do not do their job properly. In particular, in Hong Kong, there have been a number of cases where secretarial companies or company formation agents have opened bank accounts on behalf of shell companies without conducting proper verification of the underlying principals. There are cases of such companies being used as the vehicle for bogus investment schemes. We wrote to the industry on this last year, and the basic message bears repeating.