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How to create a risk-based AML strategy

A risk-based approach was identified by the FATF as an effective and proactive stance of tackling anti-money laundering compliance. They reported a risk-based approach means that “countries, competent authorities, and banks identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk.”

Adopting a risk-based approach can help you get ahead of any illicit activity, instead of just reacting to it, so you avoid fines and penalties from regulators. Ultimately, you’re looking for ways to make a proactive judgement, rather than react to criminal data, by incorporating a blend of sophisticated technology, alongside clever human assessments.

To create a risk-based approach in your AML strategy, there are three steps which you should consider; recognize the risk, assessing the risk and developing strategies to mitigate the risks.

How to conduct a risk-based AML approach:

For a thorough risk-based approach to AML, there are several factors you should consider when conducting a risk assessment on your clients:

  • Geography – is the client in a high-risk jurisdiction? Is their place of business a common breeding ground for drug smuggling or other illegal activity?
  • Vulnerabilities – is there exposure to any threat like traffickers or narcotics?
  • Infrastructure – are there any internal weaknesses that a money launderer could exploit?
  • Regulations – does the client meet regulatory demands?

Getting a full understanding of these client details can help determine how risky they could be towards your business before it’s too late.

Solutions for a risk-based AML approach:

Building up a stringent and cohesive risk-based strategy should incorporate the key AML compliance principles. We offer a range of solutions to make this process easier, but let’s breakdown their necessity.

1. Know Your Customer and Due Diligence:

This is our bread and butter when we’re looking to verify our customers, so we know who they are, and what they’re up to. Conducting KYC means you’ll have confidence in their identity, their location, the nature of their business, and what to expect from their transactions. This can strengthen your understanding of each customer and what level of risk it brings to your business.

2. Adverse Media Monitoring (AMM) and risk screening:

Conduct screening on your clients to see if there’s any adverse media, threat of corruption, sanctions, or Politically Exposed Persons (PEPs). Make sure you’re screening your clients regularly, so you’re kept abreast of any changes to risk.

Explore our range of KYC, EDD and screening solutions via our Navigator platform.

3. Transaction Monitoring:

Financial institutions need to monitor all transactions in real-time and categorize all their clients based on risk so the proper measures can take place, whether it be further monitoring or filling out a suspicious activity report (SAR). Intelligent machine learning and AI capabilities can facilitate cross border transaction limits, additional or more frequent due diligence, or restricting payment channels.

Our transaction monitoring system provides not only the necessities but unmatched cutting-edge technology to reduce false positives, save your team time and resource, and accelerate AML investigations. Explore our AML Solutions.

4. Financial Crimes Advisory:

Our FCA team is well-equipped to support the development of a risk-based AML strategy. Their industry knowledge and years of experience mean they can help you assess your AML/BSA risk profile and implement the controls to mitigate risk. We can support you with any challenges you face when conducting an Enterprise-Wide Risk Assessment (EWRA) and strengthen your risk-based AML strategy. 

Staying ahead of criminals is a necessity in this modern world, especially as the bad guys find more sophisticated ways to commit crimes. Stopping them in their tracks with a risk-based AML approach before they get the opportunity to launder dirty money is the best way to start.

Get started and fine tune your AML strategy when you introduce our range of solutions.