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Chapter 2: Identification and Assessment of ML/TF Risks
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Overview
The Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) law and supervisory instructions require financial institutions (FIs) to apply a risk-based approach in identifying and assessing money laundering/terrorism financing (ML/TF) risks.
2.1 Risk-Based Approach (RBA)
A RBA is essential for effective implementation of AML/CFT obligations. FIs must identify, assess, and understand ML/TF risks and take measures commensurate to those risks to mitigate them effectively.
Importance of RBA
- Effective implementation of AML/CFT obligations
- Identification and assessment of ML/TF risks
- Understanding of ML/TF risks faced by Oman, individual sector, and FI
2.2 ML/TF Business Risk Assessment
The risk assessment process involves:
Key Steps in ML/TF Business Risk Assessment
- Identify areas prioritized in combating ML/TF: Understand the sectors and businesses that are most vulnerable to ML/TF.
- Highlight risks associated with an FI’s business: Identify potential entry points for ML/TF in your institution.
- Apply specific controls to address identified risks: Implement measures to mitigate the risks you’ve identified.
Common Methods of Money Laundering and Terrorist Financing
Some common methods of money laundering and terrorist financing include:
- Structuring (dividing large transactions into smaller ones)
- Mingling (combining proceeds of crime with legitimate business monies)
- Use of shell companies/corporations
- Identity fraud/false identification
- New payment technologies (e.g., cell phone-based remittance)
- Virtual assets and related services
Non-Financial Businesses that Can Be Used for ML/TF
FIs must also be aware of non-financial businesses that can be used for ML/TF, such as:
- Travel agencies
- Car dealerships
- Cash-intensive businesses like large hypermarkets