🔎 Grey listing of countries like South Africa and Nigeria – A trigger to update Business Risk Assessments?
In today’s ever-changing regulatory landscape, financial institutions are constantly under scrutiny to ensure they effectively manage their compliance obligations. One crucial aspect that demands continuous attention is the business risk assessment (BRA).
As mandated in #mauritius by Section 17(4) of the Financial Institutions Anti-Money Laundering Act (FIAMLA), every reporting person is required to document their risk assessments, keep them up to date, and make them readily available to relevant competent authorities upon request.
At which time frame would the BRA be expected to be updated? Let’s explore.
The generally accepted practice is to update annually while some others do so each 2 years.
But, what if during the year there is the occurrence of an internal/external event that could materially change your exposure to the financial crime risks? It cannot be that the BRA remains unreviewed.
Establishing a list of such internal (e.g acquisition of another company) and external events (e.g grey listing of some countries) which when occurred would materially change the financial crime risks looks like a must.
In addition, being a risk-based process, when establishing the time frame to re-assess the BRA, it is recommended that the Board at a minimum consider how dynamic the financial institution is evolving or its growth stage as well as the stability of its products and services offerings.
In all cases, at which time frame and trigger events to review the BRA should be clearly articulated in the compliance framework.
Recent events and their implications
In February 2023, the FATF has added #southafrica and #nigeria on its list of jurisdictions under increased monitoring – also known as ‘Grey List’.
In addition, a report has also been published on Money Laundering and Terrorist Financing in the Art and Antiquities Market.
Are these triggering events to review your BRA and your compliance framework? Most probably yes.
These events can materially alter the financial crime risks of an organization, adequacy of the controls in place, making it imperative to review and update the BRA & Compliance framework accordingly.
Financial institutions, including banks, trust and corporate service providers, family offices, wealth management firms and others such as legal firms, real estate operators would be expected to:
- Review and Assess – to assess the impact of recent changes on their compliance framework. This involves reassessing their exposure to money laundering and terrorist financing risks, reevaluating risk tolerance and risk appetite, and considering the adequacy of existing controls.
- Update Controls and Ratings – As part of the review process, institutions should look at updating their country and client sector risk ratings to reflect the changing landscape. Additionally, the relevance and effectiveness of training programs should be reassessed and updated accordingly.
- Refresh Client Risk Assessments – Conducting refreshed risk assessments on clients is crucial to ensure that their risk profiles are accurately captured.
- Document and Approve – it is essential to thoroughly document the analysis, assessments, and discussions held with the Board. Proper documentation helps demonstrate compliance efforts and provides a clear audit trail of decision-making processes.
How can we help?
We can provide you with AML/CFT compliance assistance tailored to your business activities. Our expertise and experience in the sector enables us to design, manage, and audit the compliance framework to prevent impediments to future compliance. Thus, avoiding the risks and penalties of non-compliance and allowing for more efficient and effective compliance plans, policies and procedures moving forward.
Reach out to us on 5 255 8827 or contact@arrowheadsglobal.com for a quick chat.
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