Assessing Risk and Developing a Risk Scoring Model

Identify legal requirements, and supplement with FATF risk-based controls. Controls should be strong enough to counter the risk – low risks can be managed with minimal controls, high risk areas need robust controls. Controls include: verifying the identity of customers (KYC), customer due diligence (CDD), suspicious activity monitoring and economic sanctions screening.

Risk based approaches are more:

  • Flexible: useful because risks vary across geographical areas, customers, products and delivery mechanisms, and over time.

  • Effective: because companies know better than regulators how to mitigate money laundering risk.

  • Proportionate: because risk based approaches allow a common sense and intelligent rather than check-box approach.

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