Money laundering/terrorism financing risk assessment

Because you understand your business or organisation better than anyone else, you are best placed to identify and assess the level of ML/TF risks it faces.

You must undertake a ML/TF risk assessment so you can develop an appropriate written AML/CTF program, review it regularly and update it when there are changes to your business or organisation.

There are four main elements you need to think about in working out money laundering or terrorism financing risk. They are:

• the types of customers you have, especially if some are politically exposed persons (PEPs)
• the type of designated services you provide
• how you provide those services (for example face-to-face or online)
• the foreign countries or regions – known as foreign jurisdictions – you operate in or do business in.

You must measure the level of risk for every designated service you provide. You should rank each service as low, medium or high risk. Your AML/CTF program should set out how you minimise and manage each level of risk.

When developing your customer identification and verification procedures, you must also consider the risk posed by:

• the beneficial owner/s of your customers
• whether your customers or their beneficial owners are PEPs
• your customers’ source of funds and wealth
• the nature and purpose of your business relationship with your customers
• the control structure of customers who aren’t individuals, such as companies and trusts.

Reviewing your ML/TF risk assessment

The risk assessment methodology you use must be flexible enough to adapt to changes that affect your risk level. To make sure your risk assessment is current, you must always assess the ML/TF risk of any new service or process before offering it to customers. This includes:

• new designated services
• new ways of delivering existing designated services
• using new technologies to provide designated services
• engaging with a new jurisdiction.

You must also review your level of risk when there are certain changes to your customers’ circumstances. These are:

• a change in the nature of your business relationship with a customer
• the customer’s beneficial owner changes
• changes to a customer’s corporate structure or other control structures.