AML/CFT 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 your firm?

It means that as an institution subject to AML/CFT legislation, you are expected to have carried out an assessment of the AML/CFT risks you are likely to be exposed to and calibrate accordingly your AML/CFT systems and controls. The Regulation does not require solely that you adopt AML/CFT policies or procedures, but that those policies and procedures are adjusted to the type of business you are carrying on, the countries where you are providing your services and to your client base. This AML/CFT Risk Assessment has to be carried out every year and supplemented or reviewed each time your business model changes. It has to be reviewed and signed-off by Senior Management.

Please note that listing all the AML/CFT risks identified by FATF, EU or UK and stating in the policy that you have adopted a RBA is not enough. What the Regulator(s) want to see, is that you have considered the risks you may be exposed to and have adopted effective arrangements to mitigate those risks.

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.

Contact us for more information on how we can help you in designing a tailored AML/CFT Risk Assessment. You can also visit Our impact page to learn how we have helped our clients to achieve their objectives.