Firm’s Risk Assessment Reveals Areas for Improvement in Anti-Money Laundering and Combating the Financing of Terrorism Efforts
A recent risk assessment conducted by [Firm Name] has highlighted several areas where improvements can be made to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts.
Key Findings
The assessment, which evaluated various geographic and functional areas of the firm’s operations, identified several key factors that contribute to the degree of risk associated with each area. These include:
- The nature of customers’ economic activities
- The jurisdictions with which they are connected
- The characteristics of products and services offered by the firm
Higher-Risk Customer Types and Industries
According to the assessment, certain customer types and industries pose a higher level of risk due to their vulnerability to bribery and corruption, inadequate frameworks for preventing and detecting money laundering and terrorist financing, and other factors.
Areas Requiring Improvement
The assessment also identified the need for improved control environments in certain areas, including:
- Remote relationships with customers
- Straight-though processing of transactions
Action Plan
The firm’s MLRO (Money Laundering Reporting Officer) has been tasked with overseeing the completion of actions raised by the risk assessment and ensuring that they are prioritized and tracked centrally. Senior management must also justify the non-completion of these actions beyond a reasonable timescale, and ongoing non-completion should lead to further escalation.
Communication and Monitoring
The firm will now communicate the results of the risk assessment to individual business divisions, senior management, and other stakeholders, and compare current and previous risk assessments to determine if the risk rating has increased, decreased, or remained constant. The MLRO will also consider mitigating any new inherent risks identified during the assessment and fix gaps in the control environment.
Statement from [Firm Name]
“We take our AML/CFT obligations seriously and are committed to continuously improving our processes and controls to prevent money laundering and terrorist financing. This risk assessment has identified areas where we can strengthen our efforts, and we will work diligently to address these issues.”
Business Risk Assessment Process
The firm’s Business Risk Assessment process is a three-step process that involves:
- Identifying inherent risks
- Assessing the control environment
- Arriving at the residual risk
This process helps firms identify and mitigate potential risks associated with their customers, products and services, interface/delivery channels, jurisdictions, and other qualitative factors.
Full Report
The full report can be found in Appendix 1, which includes an illustrative example of a Business Risk Assessment.