Conducting a thorough money laundering risk assessment is the first step in the Anti-Money Laundering (AML) compliance journey and is a process that measures the risk and probability that a business may be used for the purposes of laundering dirty money. While it is a principal requirement in adhering to AML laws, it serves as far more than just a box to check on your way to running a legitimate business.
Whether it’s an effective evaluation of your company as a whole or the ability to focus on the riskiest aspects of your business from a money laundering standpoint, there are many upsides that come with a thorough, well-executed assessment. Here are a few of the benefits of AML risk assessments:
1. It will help you understand your business better
Conducting a proper AML risk assessment not only helps you figure out the kind of products and services you provide, but it also gives you insight on how similar businesses were run in the past. In addition to that, you’ll be able to put the geographic locations you serve into perspective. Finally, it’ll help you understand your customers better since assessments take into consideration both the type of customer you cater to and the variety of goods and services you offer them.
Undergoing an AML risk assessment gives you a more objective outlook towards your business and provides you with a deeper understanding of your company as a whole, which are two things that will prove to be invaluable to any business owner.
2. AML risk assessments are the cornerstone of a successful compliance journey
There’s a reason why money laundering risk assessments serve as the starting point in the AML compliance journey and that’s to point out the aspects of your business that house the greatest risk in attracting money launderers.
That way, you’ll know exactly what to focus on when designing and implementing your AML program and you can pattern it to be in line with the way you run your business, as opposed to a regulator conducting the risk assessment on your behalf whose findings may not be the best fit for building an AML program based on the way your company operates. After all, no one should know your business better than you.
That being said, risk assessments should serve as the blueprint for your company’s AML program, as it will give you an overview of the money laundering risks involved along with a better idea of how to mitigate them.
Also, since AML risk assessments are meant to be ongoing and not just a one-time deal, it’ll keep you up-to-date on your company’s exposure risk-wise, so annual or even more frequent reviews would be wise depending on the nature of your business and the level of risk that comes with it.
3. Independent reviews are based on AML risk assessments
As per the Anti-Money Laundering and Counter Financing of Terrorism act of 2009, all businesses must undergo an audit conducted by an independent party. This review may be conducted annually or more frequently depending on the nature and risk-level of the business and the discretion of the assigned AML supervisor.
The independent review is based on the findings from the company’s AML risk assessment and is meant to gauge how effectively the business is able to identify money laundering risks and determine risk levels, as well as ensuring that the assessments remain updated.