Chapter 28 Flashcards
What is the role of the risk based approach?
It is fundamental to satisfying the FATF (Financial Action Task Force) recommendations, the EU directive and the overall UK MLTF regime
Does the risk based approach exempt low risk clients, services and situations from CDD?
No
What is the role of senior management?
Responsible got managing all of the risks faced by the business, including MLFT risks
Should risk analysis be periodically reviewed?
Yes
What precautions should you take when you have access to a client’s own bank account?
It is essential to have a very clear written agreement with your client on the management of they money
Where applicable, make sure there is an authorisation process for parents of your own fees to ensure that there isn’y any accusation from the client of unauthorised payments of inappropriate use of client money
What categories should risks be grouped in to?
- Client
- Service
- Geography
What does the nature and extent of AML policies, controls and procedures depend on?
- The nature, scale, complexity and diversity of the business
- The geographical spread of client operations, including any local AML regimes
- The extent to which operations are linked to others organisations
What is client risk?
The overall MLTF risk posed by a client based on the ket risk categories as determined by a business
Give some examples of areas of risk: customers
- Undue client secrecy
- Unnecessarily complex ownership structures
- Business activities (eg. cryptocurrency)
- PEPs
- New clients carrying out one-off transactions
- Un-cooperative clients
- Clients with multiple bank accounts
Give examples of situations when a client is considered high risk
- The business relationship is conducted under unusual circumstances
- The customer is resident in a geographical area of high risk
- The customer is a legal person or legal arrangement that is a vehicle for holding personal assets
- Cash intensive company
- Corporate structure is unusual
What is service risk?
It’s the perceived risk that certain products or services present an increased level of vulnerability in being used for MLTF purposes.
What are some of the high and low risk factors in regards to product, service, transaction or delivery channel risk factors
HIGH RISK
• The product involves banking
- the product / service involves non-face-to-face business relationships / transactions
- Payments will be received from unknown or unassociated third parties
LOW RISK
• A life insurance policy for which the premium is lows
• An insurance policy for a pension scheme which doesn’t provide for early surrender
What is geographic risk?
It is the increased level of risk that a country poses in respect of MLTF
When considering geographical risk, factors to consider may include:
• Perceived level of corruption
•Criminal activity
• Effectiveness of MLTF control within the country
Give examples of high and low risk in regards to geographical risk
HIGH RISK
• Countries identified by credible sources as not having effective systems in place to counter ML or TF
- Countries identified as having sig levels of corruptions or other criminal activity
- Countries subject to sanctions, embargo or similar measures
- Countries providing funding or support for terrorism
LOW RISK
• EEA countries
- A third country which has effective systems in place
- Countries with low level of corruption
What is sector risk?
Are the risks associated with certain sectors that are more likely to be exposed to increased levels of MLTF
Tax services are considered to be in a sector that is attractive to criminals
