AML / CTF Risk Assessment

In June 2017, the IV AML Directive came into force to follow upon FATF Recommendations published in 2012. In January 2020, it was supplemented with AMLD V that reinforced the framework and the governing principles even further.

The main change introduced was to move from a systematic approach to combat money laundering to a risk based approach, (“RBA”), in order to ensure that resources are allocated were they are needed the most. FATF requires that each country carries-out on regular basis an identification of the AML/CFT risks it is facing and updates its regulatory frameworks accordingly. This includes requiring financial institutions and anyone subject to AML/CFT legislation to identify assess and take effective arrangement to mitigate their own AML/CFT risks.

What does it mean for you?

It means that as a Firm subject to AML/CTF regulatory requirements, you are expected to have carried out an assessment of the ML/TF risks you are likely to be exposed to and calibrate accordingly the arrangements, systems and controls you have designed to combat financial crime.

The regulatory framework does not require solely that you adopt AML/CTF policies and procedures, but that these policies and procedures are tailored to the type of business you are carrying on, the countries where you are providing your services and to your client base. This AML/CTF Risk Assessment has to be reviewed on yearly basis and each time your business model changes. It has to be reviewed and signed-off by the Firm managing body.

Please note that listing all the ML/TF risks identified by the FATF, the EU as relevant and the country where your Firm is registered while stating in your policies that you have adopted a Risk Based Approach, (“RBA”) will not be enough.

Ex: a Wealth Management firm dealing with high profile individuals will have to adopt more thorough Enhanced Due Diligence measures than a Broker dealing only with Authorised firms. Accordingly an Asset Manager or a CFD provider using Introducers will have to adopt a comprehensive Due Diligence process to carry-out suitable verification of their counterparties on a on-going basis and at inception, including payment controls and inducement reviews.


How can we help?

Deontea can help you put together a proportionate AML/CFT Risk Assessment policy/procedure that corresponds to the complexity of your business model and walk you through the actual AML/CFT Risk Assessment.

We have already helped numerous institutions in EU, including in the UK, to not only quality assess their AML/CFT frameworks but also to carry-out an AML/CFT Risk Assessment of their activities. It is a mandatory requirement you cannot overlook that has been further reinforced by the AMLD V that came into force the 10th January 2020.