20 Questions to Risk Assess Your BSA AML Program in a Post-Pandemic World

Your risk assessment structure will depend on the size and organization of your business and the types of products and services it offers. Central to the customer AML risk assessment is a risk model that calculates a risk score, or a risk rating, such as high, medium, or low. This risk score or rating provides the AML Officer and the business line with a clear image of the risks the customer relationship and activities pose to the institution. Ncontracts provides integrated risk management and compliance software to a rapidly expanding customer base of over 4,000 financial institutions, mortgage companies, and fintechs in the United States. The ability to measure, understand, and explain your institution’s money laundering risk is a vital part of a sound risk management framework.

• Risk assessments should still be applied to transactions that were decided to be low risk in the companywide risk assessment.
• But the measure stalled amid the enactment on Jan. 1, 2021, of the AML Act, which tasked FinCEN with implementing far-reaching reforms to the Bank Secrecy Act, or BSA, including the issuance of the national priorities.
• This concerns how the AML risk assessment fares when it focuses on the process of signing up new customers and setting up their accounts.
• Each year, the UK government publishes a National Risk Assessment (NRA) that outlines the latest trends in money laundering and terrorist financing.
• Willie Maddox, CPA, CAMS, CRCM, is executive vice president and chief risk officer at Atlantic Community Bankers Bank.
• A risk assessment is largely based on intuition and knowledge of how criminals exploit the private sector to launder money as well as proscribed business processes.

Most organizations will use a sliding scale of 1 to 3, with 1 representing a low inherent risk and 3 indicating a high inherent risk. A risk assessment is largely based on intuition and knowledge of how criminals exploit the private sector to launder money as well as proscribed business processes. It is therefore imperative, and a company’s responsibility, that the staff performing these assessments have the adequate training and tools to perform them. All UK businesses have a responsibility to prevent money laundering and other forms of financial crime. Again, you should keep a record of your AML risk assessment methodology and your processes and observations throughout these stages. By doing so, you will be able to show your workings if or when an AML audit/investigation is called for, and you will also help yourself to improve the process for the next time an AML risk assessment is in the best interests of the organization.

Are AML Risk Assessments Required?

Risk assessments are a key component of any firm’s anti-money laundering (AML) tool kit, and can help businesses to measure the likelihood that they will inadvertently support or engage in criminal behaviour. Anyone assessing AML risks must understand the profiles of the given organization’s customers and where those customers are operating from. In fact, they should know as much as possible about where the organization itself is operating from, as well, because certain locations are considered more high-risk than others. Whether your organization will be required to carry out an AML risk assessment hinges on whether you are in an industry and a jurisdiction where you could face penalties for refusing to do such an assessment. You will need to pay particular attention to higher-risk transactions and clients’ business relationships.

Assessing these factors will help you identify financial crimes such as terrorist financing, bribery and corruption. You can only avoid government sanctions and the wrath of FinCEN and other regulatory agencies by identifying risks and then taking steps to mitigate them. By putting these steps in place, you can confidently run the what is aml risk anti money laundering risk assessment, successfully minimizing all dangers and guaranteeing complete regulatory compliance. And sometimes, seemingly innocent people can do terrible things you never thought possible. You document each step, so you can prove to government officials that you take money laundering very seriously.

Steps for Completing an AML Risk Assessment

Assessing customer risk is a fundamental component of a financial institution’s overall AML risk evaluation. Although risk assessment procedures are not specifically required by law, proper monitoring of customer accounts, individual transactions and all suspicious activity is. These businesses include liquor stores, casinos, convenience stores and parking garages. An actionable AML and sanctions risk assessment program is an area where financial institutions and regulators should be able to find common ground. Financial institutions are constantly evaluating ways to be more efficient as a means to limit compliance costs. Financial institutions should identify outdated or obsolete controls as part of the identification and assessment of controls.

This can help when prioritising certain activities as part of a risk-based approach to compliance. Ultimately, an AML checks risk assessment can help businesses to reduce the risk of money laundering and terrorist financing. These measures are an essential part of any anti-money laundering compliance program, and can help organisations to stay on the right side of the law. After identifying and highlighting the money laundering risks their company is facing, directors then must design an appropriate risk assessment procedure to ensure they identify any potential transaction that is part of a money laundering scheme. There is a significant money laundering risk that comes when organizations don’t have stringent Know Your Customer (KYC) precautions in operation. As such, anyone who conducts an AML risk assessment will be carefully inspecting the safeguards that are in place to protect the organization and its customers from suspicious new accounts.

Risks associated with your products and services

To understand how Jumio can help with AML risk assessment, request information from a specialist today. Any company that deals with many high-profile clients such as politicians and entertainers is at risk for money laundering. These people are vulnerable to blackmail or might be trying to avoid government taxes. It pays to be alert to potential problems with these politically exposed persons (PEPs).

It is important to remember that AML risk assessment is an iterative process necessitating regular revisions and continuous improvement. Many organizations grapple with poor data quality and struggle to build a risk scoring model that accurately evaluates the risk of financial crime within each business relationship. While the promise of data science and artificial intelligence (AI) hold immense potential for the future, financial institutions still rely on rules-based models that aggregate data from multiple sources to derive a risk rating.

How AML Risk Assessments Work

You now know why you need to build an effective AML risk assessment system and understand the basic categories of risk. The main indicators of money-laundering risk for most businesses are products and services, customer profiles and geographic location. A new risk-assessment mandate would boost regulators’ enforcement powers for all categories of financial institution, said Stipano, now a partner at Davis Polk & Wardwell in Washington, D.C. You must send a Suspicious Activity Report (SAR) to the National Crime Agency if you have any suspicion that a transaction relates to money laundering and/or terrorist financing and get a defence to protect you from a money laundering offence. If your suspicion is raised after the transaction is completed you must send a SAR at the earliest opportunity. Businesses that are covered by the Money Laundering Regulations have to use a risk-based approach to prevent money laundering.

Controls and control effectiveness evaluations are mapped against best practices and guidance from global authoritative sources, paving the way for better AML risk assessment standards. This guide explains what risk assessments are, and how any business can apply them to combat money laundering while meeting their regulatory compliance obligations. AML risk assessments are helped by SEON thanks to its KYC AML transaction monitoring system, which determines the extent to which an exchange is suspicious or legitimate and assigns a fraud risk score accordingly. Keeping a checklist of the organization’s internal controls is a great step, but you should also put yourself in the shoes of an auditor. Determine how effectively processes are being implemented and followed and don’t hesitate to update your programs to meet the latest AML requirements if needed. An AML (anti-money laundering) risk assessment is the process by which an organization assesses the extent to which it is both protected from and vulnerable to money laundering operations.

Supporting your AML/CFT, Sanctions and Suspicious Activity Risk Assessments

You can decide which areas of your business are at risk and put in place measures to prevent money laundering occurring by using what’s known as a ‘risk-based’ approach. Best-in-class web & mobile trading platforms, sales-driven CRM, full integration with MT4/5, and 150+ payment providers. This blog is the second in a series of blogs set out to help firms grapple with the latest Legal Sector Affinity Group (LSAG) guidance.