Financial Crime World

Here is the article rewritten in markdown format:

Managing Money Laundering and Financial Terrorism Risks in Financial Institutions

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Risk Identification

Risk identification is a critical process that helps financial institutions identify money laundering (ML) and financial terrorism (FT) risks. This process involves comprehensive and specific risk evaluation of various factors, including products, services, transaction types, countries, customer attributes, and other relevant factors.

Required Actions for Financial Institutions

  • Identify ML/FT risks through comprehensive and specific evaluation
  • Consider the financial institution’s specific features (e.g., products, services, customers)
  • Break down associated risks into smaller categories and assess them individually

Expected Actions for Financial Institutions

  • Assess risks for each category and combine results to visualize a risk map

Risk Assessment

Risk assessment is another crucial process that helps determine the likelihood and impact of ML/FT risks. This process must be conducted at least once a year, or when new risks or regulations occur.

Required Actions for Financial Institutions

  • Conduct risk assessment at least once a year, or when new risks or regulations occur
  • Involve the Board in the process of risk assessment and obtain approval from the Board

Expected Actions for Financial Institutions

  • When products and services are wide-ranging, break down associated risks into smaller categories and assess them individually

Risk Mitigation

Risk mitigation is a process that helps financial institutions mitigate ML/FT risks through effective measures. This requires collecting and verifying information about specific customers’ profiles and activities.

Required Actions for Financial Institutions

  • Collect and verify information about customers and their activities and transactions
  • Determine and implement effective measures to mitigate identified risks
  • Undertake enhanced mitigation measures in cases where ML/FT risks are high
  • Examine updated cases and information from domestic and foreign authorities and industry associations, and then undertake mitigation measures commensurate with the risk faced by the financial institution

Customer Due Diligence (CDD)

Customer due diligence is a key element of risk mitigation that involves:

  • Identifying and assessing ML/FT risks with regard to a specific customer
  • Reviewing information about the customer and their transactions in light of the results of risk assessment
  • Determining measures necessary to mitigate identified risks