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Institutions which are covered under the AMLD (Anti Money Laundering Directive) are obliged to implement a risk policy. Depending on the level of risk which is identified during the client investigation a more thorough investigation may be required. Risk factors may be related to multiple origins: the client, the product, the nature of the service, transactional risk, supply channel-related risk factors, and geographic risk factors. Some of these risk factors are deemed to be unacceptable, meaning that you may not engage in a business relationship with this client.
Client-related risk factors are, as the name implies, risks associated with the client. Some examples are:
Product, service, transactional, and delivery channel risk factors are risks associated with the delivery of your product or service, OR with the work of your client. Certain transactions or supply channels may entail additional risks, elevating the risk assessment and requiring a more extensive investigation.
Some examples of product, service, transactional or supply channel-related risk factors are:
There are multiple sources that define geographic risk factors, such as the FATF lists, the European Sanctions Countries and the CPI.
The FATF publishes a list of countries with high risk of financial abuse regarding money laundering or the financing of terrorism multiple times a year. The EU sanctions map provides an overview of countries with the corresponding sanctions.
The CPI scores and ranks countries/territories based on how corrupt a country's public sector is deemed to be by experts and business leaders. It is a composite index, combining 13 separate investigations and reviews into corruption by various reputable institutions. The CPI is the most widely used indicator of corruption worldwide. Some examples of geographical risk factors are:
If the client investigation shows that the client poses too high a risk, the institution may not enter a business relationship with this client. Even existing business relationships need to be terminated at the next possibility if intermediate assessments deem the risk beyond this level. If the WWFT-liable institution suspects money laundering or the financing of terrorism, the institution is obliged to report it to the Financial Intelligence Unit (FIU-NL). The institution must establish a client-exit policy to ensure that the business relationship is no longer retained in such a case. This policy should include, among other things, the circumstances, and procedures through which the business relationship with the client will be terminated. Some unacceptable risks may be:
CDD On Demand makes it easy to carry out part of the client research by allowing you to quickly identify risk factors of your clients, to identify the UBO, and identify geographical risks. Request your free credits today to experience the time-savings of CDD On Demand firsthand! Better safe than sorry