Core Focus: How the two-tier architectural model allocates AML/CFT responsibilities between the central bank and private intermediaries, and the implications for financial integrity.

In-Depth Notes:
The allocation of AML/CFT responsibilities in a CBDC system depends critically on the architectural model. In the two-tier (or hybrid) model that dominates CBDC design globally, the central bank issues CBDC while authorised financial institutions (commercial banks, payment service providers) distribute it and manage customer-facing functions . This allocation has significant implications for financial integrity.

The Hybrid Model and AML/CFT:
In the hybrid CBDC model introduced at the Monetary Authority of Singapore’s Global CBDC Challenge, financial institutions perform customer due diligence, AML/CFT duties such as recording and reporting suspicious transactions, while the central bank is responsible for conducting AML regulations and supervising fulfilment . The solution proposed that financial institutions should also be responsible for transaction monitoring, fraud detection and prevention efforts . This approach harnesses existing supervisory frameworks and leverages the compliance infrastructure already in place at financial institutions.

The Central Bank’s Role:
The central bank retains ultimate responsibility for the AML/CFT framework, including setting regulations, supervising compliance, and enforcing sanctions. In a direct CBDC model where the central bank directly settles payment transactions, the responsibility to perform due diligence and report suspicious transactions would shift to the central bank, potentially requiring it to expand its operations beyond existing mandates . The IMF has noted that jurisdictions designing rCBDCs should conduct thorough, ongoing AML/CFT risk assessments and adopt a risk-based approach to mitigation .

Legal and Capacity Considerations:
The intermediated model may require legal updates and capacity building, particularly where non-bank intermediaries such as telecom operators are considered . Regulators will need clear rules on customer due diligence, record-keeping and transaction monitoring to avoid creating weak links in the payments ecosystem . The IMF recommends early stakeholder engagement, pilot-based risk learning and investment in supervisory capacity .

The “Lex Generalis” and “Lex Specialis” Framework:
A consistent regulatory approach is advocated that is adaptable to future digital innovations and based on a combination of overarching principles (“lex generalis”) and tailored instrument-specific measures (“lex specialis”) . This ensures that AML/CFT measures are applied consistently across payment instruments while allowing for the unique features of CBDCs to be addressed.