Africa-Press – Seychelles. The requirement to conduct an AML/CFT Risk Assessment
With the goal of protecting the global financial system from money laundering and terrorist financing risks, the global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF), urges entities, which include financial institutions and designated non-financial businesses and professions, to manage their money laundering and terrorist financing risk exposure by adopting sound processes and monitoring efforts on a risk based approach.
An appropriate risk-based approach begins with the acquisition of an in-depth and up-to-date awareness of the entities’ risk exposure and an understanding of those risks. This is achieved by undertaking a risk assessment which is a process using appropriate methodology to identify, analyse and understand the money laundering and terrorist financing risks. A well-implemented and documented risk assessment should act as a first step and serve as the cornerstone of a risk-based approach to the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime of the entities.
The benefits of undertaking a risk assessment are significant, which:
Assists to optimise resources, by enabling entities to focus on higher risk / high impact areas which is the basic premise of a risk based approach.
Demonstrates an entity’s commitment to understand and analyse money laundering and terrorist financing risks.
Risk assessment can equally help to identify key risks, control weaknesses and where remediation efforts may be required on an ongoing basis.
Ensures that senior management are better informed of the money laundering and terrorist financing risks facing the business while facilitating strategic decision making.
Further to the benefits stated above and in order to implement effective AML/CFT systems and controls, entities must always ensure that it is aware of the potential money laundering and terrorist financing risks it might be exposed to when in operation, taking into consideration the likelihood of these risks breaching any shield of defence it has in place and the impact these risks might have on the entity.
Entities must always have in place adequate measures to reduce its level of exposure to money laundering and terrorist financing risks. The level of exposure to these risks by an entity will depend on a number of factors specific to the entity, such as –
The profile of its customers;
The geographic location in which it conducts its business operation;
The products that it deals in;
The services that it provides or receives;
The methods used by the entity to deliver its products or services to its customers; and
The transactions that it conducts.
Entities should also consider any other factors specific to their business operations that may pose as a risk including the size and nature of the business operation when conducting the risk assessment.
In Seychelles, the obligation for entities to identify and assess money laundering and terrorist financing risks and take appropriate measures to mitigate the identified risks is provided under Section 32 of the Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020 (AML/CFT Act), which states that the reporting entities under the AML/CFT Act “shall take measures to identify, assess, understand and monitor its risks of money laundering and terrorist financing activities and take appropriate measures to mitigate the risks identified”. The reporting entities are also required to document the outcome of the risk assessment conducted, regularly update it and submit same to its supervisory authority, upon request.
It is important to note that negligence or failure to take reasonable measures to identify, assess and monitor the risks of money laundering and the terrorist financing activities is an offence and reporting entities shall be liable on conviction to a fine not more than R400,000.00 as per Section 32 (6) of the AML/CFT Act.
For more information on undertaking a risk assessment, reporting entities are encouraged to refer to the AML/CFT Institutional Risk Assessment Guidelines which can be accessed on the FSA’s website at: – https://fsaseychelles.sc/aml-cft/amlcft.
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