As an Accountable Institution, it is important to have a heightened awareness of what raises alarm bells or suspicion of money laundering and/or other financial crimes. Many factors come into play when assessing risk, and so, Accountable Institutions should use a combination of indicators to holistically assess the risk that a client, business relationship or single transaction may pose.
As recommended by the Financial Action Task Force (FATF) and Financial Intelligence Centre (FIC), one of these indicators should relate to geographic areas📍
Geographic risk is an important component to leverage when assessing client and transaction risk as each country poses different levels of risks based on the features and activities that are associated with it.
However, geographical risk alone does not determine a clients risk factor. It is also important to consider the relationship of the client, product, service, or source or destination of any funds to those jurisdictions associated with higher levels of financial crime to accurately assess the level of risk. Simply put, if a client was born, resides or transacts in a higher risk country, it could be an indicator to look a little closer.
Although there is no single globally accepted list that accountable institutions can rely on to determine the risk posed by a particular area, the FIC considers the listings issued by the FATF as a minimum.
The FATF recently issued a notice and ‘call to action’ around higher-risk jurisdictions to provide some clarity and guidance around the potential money laundering and terrorist financing risks associated with certain countries.
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