If you think compliance is expensive, try non-compliance
In line with the Prevention of Money Laundering and Funding of Terrorism Regulations, financial market participants are subject persons as they either provide or receive relevant financial activity services. This means that market participants must adhere to AML/CFT obligations in terms of conducting risk assessments to identify and mitigate the ML /FT risks they are exposed to. By law, every professional shall have in place risk assessments that consider the risk factors, particularly those relating to the customers, countries or geographical areas, products, services, transactions, and delivery channels. Unfortunately, by far not all professionals follow the regulatory requirements as was identified by the CSSF in its latest annual report.
The most common weakness faced by the professionals, when it comes to AML/CFT compliance, is the limited resources and knowledge at their disposal and that is required to implement a robust AML/CFT framework, which leads to the gaps in the implementation of the regulatory requirements. A lot of – especially small and middle size – professionals show lack of understanding when they are asked to explain their global business ML risk and consider such requirement as excessive.
Performance of the ML/FT Risk Assessments will enable you to identify areas of vulnerability of your organization, which in turn will help you to determine how to correct problems in your AML efforts. Your risk assessment structure will depend on the size and organization of your business and the types of products and services it offers.
Factors you must consider while creating your risk assessment include:
– Your customer types
– The geographical locations of your customers
– Customer activities
– The products and/or services you offer (business lines)
– How your company makes transactions
– Origins of your customers’ funds
Assessing these factors will help you identify financial crimes such as terrorist financing, bribery and corruption. You can only avoid government sanctions and the wrath of CSSF and other regulatory agencies by identifying risks and then taking steps to mitigate them.
Failing to comply with AML/CFT requirements can lead to significant administrative penalties, as has been recently imposed by the CSSF.
How FUND AML can help
Together with you we will identify the main potential areas of exposure of your business to the money laundry (vulnerabilities and threads), analyze the risk factors that lead to higher exposure and develop mitigation measures. While running your risk assessment model, we will help you to determine risk rating and risk range for your clients and products, judging if they are low, medium or high risk for money laundering. We will formalize the results of the risk assessment as well as the allocated risk scoring in the robust and comprehensive document.