Trinidad and Tobago: Financial Institutions Urged to Adopt Risk-Based Approach to Combat Money Laundering, Terrorism Financing
Financial institutions in Trinidad and Tobago are being urged to adopt a risk-based approach (RBA) to combat money laundering, terrorism financing, and proliferation financing. This approach is mandated by Regulation 7 of the Financial Obligations Regulations, 2010, which requires Supervised Entities (SEs) to identify, assess, understand, and document their risks.
What is a Risk-Based Approach?
A RBA is a measurable methodology that enables financial institutions to understand and reduce the risks they face. The approach involves four simple steps:
- Identification of Risks: Identify the potential risks faced by the institution based on factors such as customers, products and services offered, delivery of products and services, and geographic location.
- Assessment and Evaluation of Risks: Assess and evaluate the identified risks to understand their likelihood and impact, and develop appropriate measures to address them.
- Mitigating and Managing Risks: Develop a Compliance Programme that includes policies and procedures to minimize or manage the risk. Examples of risk mitigating measures include cash transaction limits, management approval of high-risk customers, continuous training of staff, and transaction monitoring.
- Monitoring and Reviewing: Regularly review the ML/FT/PF risk assessment to ensure that policies and procedures intended to mitigate risk are appropriate and valid.
Benefits of Adopting a Risk-Based Approach
The benefits of adopting a RBA include:
- Effective utilization of resources, as SEs focus on medium and high-risk activities
- Development of measures to manage and mitigate such risks
Experts’ Urgent Call to Action
Experts stress that adopting a RBA is crucial in the fight against money laundering, terrorism financing, and proliferation financing. They urge financial institutions in Trinidad and Tobago to take immediate action to comply with the regulations.
Additional Resources
- Financial Intelligence Unit of Trinidad and Tobago (FIUTT) regularly conducts outreach and awareness seminars to provide SEs with information on their AML/CFT obligation.
- Regulation 7 of the Financial Obligations Regulations, 2010
- FATF’s guidelines on risk-based approach to combating money laundering and terrorist financing.