Title: Strengthening Anti-Money Laundering Defenses: NBB Encourages Belgian Financial Institutions to Conduct Comprehensive Risk Assessments

Introduction

The National Bank of Belgium (NBB) urges Belgian financial institutions to prioritize risk assessments as a fundamental step in fortifying their defenses against money laundering and terrorist financing (ML/FT). This recommendation aligns with recent updates from the Financial Action Task Force (FATF) and Directive 2015/849.

The Importance of a Risk-Based Approach

According to the European Banking Federation (EBF), a risk-based approach, backed by a detailed overall risk assessment, is essential for Belgian financial institutions to effectively manage ML/FT risks. This assessment is an integral component of these institutions’ organizational structure and risk management systems.

Key Elements of the Overall Risk Assessment

Consisting of the following components, an overall risk assessment plays a significant role in enabling Belgian financial institutions to effectively manage ML/FT risks and maintain a strong compliance framework.

1. Identification and Analysis of ML/FT Risks

   • Understanding specific ML/FT risks within an institution
   • Assessing the probability of occurrence
   • Evaluating the potential impact on the organization
   • Transparent and consistent process

2. Assessment of Existing Risk Management Measures

   • Evaluating the adequacy of current controls for managing risks

3. Implementation of New or Additional Risk Management Measures

   • Defining new or additional measures to mitigate residual risks

4. Update and Review of the Overall Risk Assessment

   • Keeping assessments updated in the face of internal and external changes
   • Submitting updated assessments to the NBB

Identification and Analysis of ML/FT Risks

1. Identification of Risks

   • Thoroughly understanding ML/FT risks and their context within the institution

2. Assessment of Risks

   • Evaluating the probability of occurrence
   • Assessing the potential impact on the organization
   • Ensuring the process is transparent and consistent

Analysis and Assessment of Existing Risk Management Measures

1. Determining Sufficiency of Current Controls
   • Carrying out a gap analysis to evaluate the adequacy of existing controls

Implementing New or Additional Risk Management Measures

1. Identifying Required Measures
   • Defining new or additional measures based on the gap analysis
   • Prioritizing the implementation of solutions based on risk reduction potential and impact on AML/CFT mechanisms

Updating and Reviewing the Overall Risk Assessment

1. Keeping Assessments Current
   • Adjusting assessments as needed due to internal and external changes
   • Considering new offerings, customer segments, distribution channels, or emerging threats

Communication of the Overall Risk Assessment to the NBB

1. Documentation and Submission
   • Documenting, updating, and sharing completed assessments with the NBB

Conclusion

By conducting a comprehensive risk assessment and implementing necessary measures, Belgian financial institutions can effectively manage ML/FT risks and maintain a strong compliance framework. The ongoing risk assessment process is crucial for addressing evolving threats.