Financial Crime World

Financial Institutions Warned of Money Laundering and Terrorist Financing Risks

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Financial institutions (DNFBPs) have been cautioned about the high risks associated with certain transactions to combat money laundering and terrorist financing. The recent regulations require DNFBPs to take measures to identify, assess, and mitigate these risks.

High-Risk Transactions

The regulations highlight several categories of high-risk transactions, including:

  • Face-to-face interactions with customers
  • Products or services that favor anonymity
  • Cash transactions
  • Transactions involving new or developing technologies, such as virtual assets (cryptocurrencies)

DNFBPs must update their risk assessments regularly, particularly when introducing new products or services, delivery channels, or technologies.

New Methodology for Assessing ML/TF Risks

To comply with the regulations, DNFBPs are required to use an appropriate methodology to identify, assess, and understand their money laundering and terrorist financing (ML/TF) risks. This methodology must assist in addressing these risks and should be based on the following steps:

  1. Providing Insights:
    • Providing information about customers, products, services, transactions, and delivery channels.
  2. Interview with Compliance Officer:
    • Scheduling an interview with a Compliance Officer to review the answers provided in Step 1 and clarify any unclear points.
  3. Assessing Likelihood of ML/TF Risks:
    • Identifying the likelihood of ML/TF risks materializing, such as the misuse of a customer’s account for money laundering or terrorist financing purposes.

Assessing the Impact of ML/TF Risks

DNFBPs must also assess the impact of each risk factor, including financial damage from crime, regulatory sanctions, and reputational damages. The impact can be categorized into five stages:

  • Negligible: No impact on the business
  • Minor: Minor financial damage or regulatory consequences
  • Moderate: Moderate financial damage or regulatory consequences
  • Significant: Significant financial damage or regulatory consequences
  • Severe: Severe financial damage, loss of lives, or significant impact on human well-being

By following this methodology, DNFBPs can effectively identify and mitigate their ML/TF risks, ensuring the integrity of their operations and compliance with regulations.