The Money Laundering/Terrorist Financing Risk Assessment – Is it fit for purpose?
Aub Chapman, CAMS-Audit
Deficiencies in money laundering/terrorist financing (ML/TF) risk assessments continue to feature as a major issue in enforcement actions by anti-money laundering/counter-terrorist financing (AML/CTF) regulatory authorities in many countries. This is despite the apparent level of maturity of the AML/CTF regime in many individual countries. These deficiencies are a major concern as the primary purpose of an ML/TF risk assessment is to be instructive in the development of an AML/CTF risk management framework. This framework should be relevant and proportionate to the ML/TF risk that a reporting entity may reasonable expect to face through its business activities. The regulatory expectation is that each reporting entity will have applied the appropriate resources and expertise in developing its ML/TF risk assessment, which categorizes its customer types, products and services, delivery channels and jurisdictions as presenting a high, medium or low potential risk for ML/TF.
This paper seeks to provide AML/CTF compliance officers and AML/CTF auditors with some key issues that should be considered when assessing whether or not the ML/TF risk assessment is “fit for purpose.”