A written risk assessment is the starting point for development and ongoing maintenance of a compliance framework designed to combat money laundering and financing of terrorism.
In mid June/July 2022, the HMRC updated its Guidance Note for property agents. The Guidance Note sets out HMRC’s minimum expectation of an AML/CFT compliance program.
One area of expectation relates to the quality of money laundering risk assessments. The AML business risk assessment seems to cause many businesses to operate with regulatory risk by not having an adequate, or having no AML risk assessment.
With no adequate risk assessment in place, this increases the risk that the policies, procedures and controls are likely to be operating ineffectively. Therefore the exposure increases to unwittingly facilitating money laundering or financing of terrorism
Risk analysis is not complex, but it is a disciplined exercise. Each stage of the risk measurement process needs to be carried out with diligence and application of data analysis, management and reporting.
The AML Risk Management cycle starts with identifying Key Risk Indicators. This means those matters that cause risk to increase and decrease. To put into context for this article, when we speak of ‘risk’ we are speaking of the risk of money laundering or financing of terrorism occurring.
The basic calculation for risk is Risk = Probability x Impact. Therefore the greater the likelihood of an event occurring and the greater the harm that the event causes, then the Risk Level is known. By identifying the probability or likelihood of an event occurring and measuring the harm or impact that would result, then the level of risk is better understood. For an anti-money laundering compliance framework, when the risk level is known, this assists to develop the program of policies, procedures and controls.
For any typical business, there are 6 primary areas that have been identified as vulnerable to facilitating ML/FT. These include:
(1) The nature, size and complexity of a business;
(2) The product and services offered;
(3) Customer types (B2B and B2C);
(4) The Method used to deliver products and services;
(5) Geographies dealt with.
AML360 provides an online account allowing AML/CFT compliance officers or business owners to log-in and complete a written risk assessment. A comprehensive risk report is provided identifying and reporting on inherent risks that your business should manage. In some area, prompts for the types of policies, procedures and controls are included.
Updates to risk assessments can be undertaken as often as needed over 12-months, at no additional fee.
Get in touch with AML360 and request a FREE TRIAL or LIVE DEMO.