While it’s the commonly preconceived notion that financial institutions are the ones at risk of being used in money-laundering schemes, virtually any business runs the risk of being used in such illicit operations. This includes casinos, travel agencies, restaurants, gas stations, nail salons, and even certain charities.
With money laundering quickly becoming one of the major problems that businesses face in this day and age, the ability to properly understand the risks of your company being involved in laundering operations is absolutely invaluable.
Whether you utilize one of the many risk assessment tools available or decide on creating your very own risk assessment, it remains one of the most important aspects of kickstarting your anti-money laundering compliance journey. Not only would your company be doing its due diligence against organized crime in your country, but you would also use the assessment as the basis for the AML systems and policies of your business and would be complying with AML/CTF laws in the process.
What is an anti-money laundering risk assessment?
A risk assessment is an overall process that measures a company’s exposure to being unwittingly used in money laundering operations. Risk assessments accomplish this by pinpointing which aspects of the business are most likely to draw in criminals that are looking to launder dirty money.
The World Bank, for example, has developed a risk assessment tool called the “National Risk Assessment Tool” partly in hopes that businesses become better equipped to design an effective AML program that is more capable of warding off criminal intent.
Purposes of a risk assessment:
- Risk assessments help you identify any shortcomings in your current AML policies and systems, allowing you to improve upon them before criminals have the opportunity to take advantage.
- They help management better understand how the company’s AML program caters to its risk profile.
- To help create strategies that can mitigate the risk of the company being unwittingly used for money laundering.
- Risk assessments ensure that the higher-ups and regulators remain in the loop when it comes to the major money laundering risks that the business faces, along with any gaps in the AML process.
- They also assist in knowing how to properly distribute resources according to the corresponding risk levels.
Hallmarks of a good risk assessment tool:
- It is developed in line with the latest US AML laws and applies and adheres to the requirements and best practices set by regulators and supervisors around the world.
- Is able to assess risk both quantitatively and qualitatively.
- Should allow the customizing of risk factors, including industry, product/service, customer, and geographical risks.
- Includes accurate and easy-to-understand scoring matrices.
- Should be able to gauge the frequency of necessary reviews based on the company’s risk level.
- Is able to successfully monitor every client transaction and provide alerts when a transaction is not within the client’s anticipated profile.
- Should include Know Your Client and Customer Due Diligence identification, management, and documentation.
- Needs to be capable of providing comprehensive reports and summaries that are easy to follow.