As emphasized in the Basel Committee guidance for 'Sound management of risks related to money laundering and financing of terrorism', the third line of defense, or audit function, should:

While regular audits are important for compliance, the Basel Committee does not specify a strict timeline for conducting AML audits. The focus of the guidance is on the independence and objectivity of the audit function rather than the frequency of audits, which can vary depending on the organization’s needs and risk profile.

Involvement in daily operations could compromise the independence of the audit function. The guidance recommends that the audit function maintain a level of separation from operational activities to ensure unbiased evaluations and to avoid conflicts of interest that could arise from direct involvement in the AML program.

This choice misinterprets the role of the audit function. While the audit function must remain independent, it is expected to evaluate and express opinions on the effectiveness of remediation actions. Independence does not equate to a lack of accountability in assessing the adequacy of responses to audit findings.