Financial Crime World

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Regional Risk Assessment for Money Laundering and Terrorist Financing

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This comprehensive document outlines the phases and steps involved in conducting a regional risk assessment for Money Laundering (ML) and Terrorist Financing (TF).

Phases of the Regional Risk Assessment

The regional risk assessment involves five key phases:

1. Risk Identification

  • Identify potential ML/TF schemes and assess their likelihood.

2. Assessment of Threat Level

  • Evaluate the intent and opportunity to use each scheme, considering factors like simplicity, availability, and effectiveness of control measures.
  • Take into account the following:
    • Intent: The motivation behind the scheme.
    • Opportunity: The ease with which the scheme can be carried out.

3. Assessment of Vulnerability Level

  • Assess the vulnerability of each sector or area where ML/TF schemes may occur, based on the availability and effectiveness of protective measures.
  • Consider factors such as:
    • Availability of resources to implement controls.
    • Effectiveness of existing control measures.

4. Assessment of Resulting Regional Risk Level

  • Determine the level of risk for each identified scheme by combining the threat and vulnerability levels.

5. Development of Risk Management Measures (Risk Mitigation Measures)

  • Identify priority areas for risk mitigation and develop an Action Plan to address them.
  • Ensure that recommendations are included in the report.

Key Takeaways

  • The regional risk assessment should be conducted in a way that ensures objectivity, transparency, and consistency.
  • The resulting report should provide a clear description of:
    • The most common ML schemes.
    • Sectors vulnerable to ML/TF.
    • Identified risks.
  • Recommendations for eliminating identified risks should be included in the report.
  • An Action Plan should be developed to mitigate identified regional risks.
  • Technical assistance plans may be required to implement risk mitigation measures.

Regional Risk Assessment Levels

Regional risks can be categorized into four levels:

1. High Risk (2-3 points inclusive)

  • Regional risks requiring significant attention and enhanced risk mitigation measures.

2. Moderate Risk (1-2 points inclusive)

  • Regional risks requiring ongoing monitoring and enhanced risk mitigation measures.

3. Low Risk (0-1 points inclusive)

  • Regional risks requiring standard risk mitigation measures.

4. No Risk (0 point)

  • No risk identified.

By following this structured approach, countries can identify and mitigate regional risks for ML/TF more effectively.