Abstract
Money laundering risk assessment is a primary tool to combat the perils of money laundering. This study is based on a model of risk assessment, which assists the management of financial institution to evaluate the range and level of money laundering risk (MLR). In this model, MLR is primarily divided into two risk levels, i.e. Inherent Risk & Control Risk with their auxiliary subdivisions. Analytic Hierarchy Process (AHP) software assists in its computations and provides for pairwise weights and comparisons. By using this model, money laundering risk of a financial institution could be assessed.
Highlights
Financial Institutions encompass a wide range of financial products and services, which are associated with different money laundering risks
In identifying and assessing the money laundering risks to which they are exposed, banks should consider a range of factors which may include: the nature, scale, diversity and complexity of their business; their target markets; customers, jurisdictions, distribution channels, the internal audit and regulatory
Internal controls include appropriate governance arrangements where responsibility for AML/CFT is clearly allocated, controls to monitor the integrity of staff, in accordance with the applicable local legislation, especially in cross-border situations and the national risk assessment, compliance and controls to test the overall effectiveness of the bank’s policies and processes to identify, assess and monitor risk
Summary
Financial Institutions encompass a wide range of financial products and services, which are associated with different money laundering risks. To combat these risks financial institutions review, assess and weigh inherent risks; allocate their compliance resources, organize their internal controls and internal structures, and implement policies and procedures to deter and detect money laundering aspects (FATF, 2014). In identifying and assessing the money laundering risks to which they are exposed, banks should consider a range of factors which may include: the nature, scale, diversity and complexity of their business; their target markets; customers, jurisdictions, distribution channels, the internal audit and regulatory.
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