Financial Crime World

Risk-Sensitive Sources: DNFBPs Must Assess Likelihood and Impact

In a move to combat money laundering and terrorism financing, sources of non-financial businesses and professions (DNFBPs) are being urged to assess the risk of their services being used for illicit activities.

The Importance of Risk Assessment

According to industry experts, DNFBPs must take a risk-sensitive approach by identifying the likelihood that their services will be misused. This includes assessing the impact of such misuse on their business and reputation.

Step-by-Step Guide to Risk Assessment

To conduct a thorough risk assessment, DNFBPs are advised to follow these steps:

  • Identify the types or categories of risk that may materialize.
  • Assess the likelihood of each risk factor occurring. The likelihood can be categorized into five stages:
    • Almost certain (91-100%)
    • Likely (61-90%)
    • Possible (41-60%)
    • Unlikely (11-40%)
    • Rare (0-10%)
  • Map these answers to different risk factors and assess the likelihood of each risk factor occurring.
  • Assess the impact or severity of each risk factor happening. This includes considering:
    • Financial damage from the crime itself or regulatory sanctions
    • Reputational damages to their business

The impact or severity can be categorized into four stages:

+ Negligible: short-term or low-cost consequences
+ Minor: moderate financial and reputational impacts
+ Moderate: significant financial and reputational impacts
+ Significant: high-cost and long-term consequences that affect the proper functioning of the DNFBP

Consequences of Failure to Assess Risk

Experts warn that failure to assess the risk of misuse could result in severe consequences for DNFBPs, including:

  • Regulatory censure
  • Loss of credibility
  • Prosecution

Conclusion

DNFBPs are advised to take a risk-sensitive approach by identifying the types or categories of risk, mapping them to different risk factors, assessing the likelihood of each risk factor occurring, and considering the impact or severity of each risk factor happening. By doing so, they can protect their business and reputation from potential risks.

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“DNFBPs must take proactive steps to identify and mitigate these risks,” said a leading expert in the field. “By assessing the likelihood and impact of misuse, they can ensure that their services are not used for illicit activities and maintain a positive reputation.”