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Assessing Risks and Applying a Risk-Based Approach
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Insurance institutions play a crucial role in combating money laundering (AML) and counter-terrorism financing (CFT). In this section, we will discuss the key points related to assessing risks and applying a risk-based approach as outlined by anti-money laundering regulations.
Key Points
Risk Assessment
Insurance institutions should take appropriate steps to identify and assess their money laundering and terrorist financing risks. This involves:
- Identifying potential risks and vulnerabilities in their operations
- Assessing the likelihood and potential impact of these risks on their business
- Documenting these assessments to demonstrate their basis and keep them up-to-date
Risk-Based Approach
The nature and extent of any assessment of money laundering and terrorist financing risks should be proportionate to the size and nature of the business. This means:
- Taking a more thorough and comprehensive approach for higher-risk institutions or activities
- Implementing simpler measures for lower-risk institutions or activities
Enhanced Measures
Where higher risks are identified, insurance institutions should take enhanced measures to manage and mitigate those risks. These may include:
- Implementing additional controls and procedures
- Conducting regular audits and reviews
- Providing training and awareness programs for staff
Simplified Measures
Where lower risks are identified, insurance institutions may take simplified measures to manage and mitigate those risks. These may include:
- Implementing basic controls and procedures
- Conducting occasional audits and reviews
- Providing general awareness programs for staff
Risk Differentiation
Insurance institutions may differentiate the extent of measures depending on the type and level of risk for various risk factors. This may involve:
- Applying different controls and procedures for different types of transactions or activities
- Implementing more stringent measures for higher-risk transactions or activities
- Providing additional training and awareness programs for staff who handle high-risk transactions
Additional Requirements
New Products and Practices
Insurance institutions should identify and assess money laundering or terrorist financing risks related to new products, business practices, delivery mechanisms, and technologies. This includes:
- Conducting a risk assessment prior to launching new products or using new technologies
- Implementing additional controls and procedures for new products or services
Risk Assessment Prior to Launch
Insurance institutions should conduct a risk assessment prior to launching new products, business practices, or using new or developing technologies. This involves:
- Identifying potential risks and vulnerabilities in the new product or service
- Assessing the likelihood and potential impact of these risks on their business
- Documenting these assessments to demonstrate their basis and keep them up-to-date