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The Financial Action Task Force is in the process of updating its guidance on National Risk Assessments to make it more effective, comprehensive, and useful for all stakeholders involved. It has invited contributions from the private sector, civil society and academia to ensure the guidance is aligned with their experiences by 22 July 2024.
What is a National Risk Assessment?
A National Risk Assessment (NRA) is a comprehensive process used by countries to identify, assess, and understand the money-laundering (ML) and / or terrorism financing (TF) risks they face. This process involves evaluating threats and vulnerabilities, determining the level of risk, and developing strategies to mitigate these risks. The NRA provides a foundation for informed policymaking, resource allocation, and the implementation of effective AML / CFT measures. It ensures that national strategies are aligned with the specific risk landscape of the country and that they address both domestic and international threats.
There are several steps a country can take to ensure their NRA reporting process is fit for purpose:
Establish a coordinating authority: Designate a lead authority or mechanism to oversee and coordinate the NRA process. This body should have the mandate to gather information, engage stakeholders, and drive the assessment forward.
Define the scope and objectives: Clearly define the objectives, scope, and methodology of the NRA. This includes identifying which sectors and activities will be assessed and the specific risks to be evaluated.
Engage stakeholders: Involve all relevant stakeholders, including government agencies, financial institutions, DNFBPs, and international partners to gather their input and data.
Data collection: Gather quantitative and qualitative data from various sources. This includes statistics on suspicious transactions, financial flows, criminal activities, and typologies of ML / TF.
Risk identification: Identify the sources and methods of ML / TF within the country. Analyse the different sectors, products, services, and delivery channels that may be vulnerable to abuse.
Risk analysis and assessment: Evaluate the identified risks based on their likelihood and potential impact. Use risk assessment models and tools to quantify and prioritise these risks.
Develop a risk-based approach: Formulate a risk-based approach to allocate resources and design AML / CFT measures that address the identified risks effectively. This ensures that high-risk areas receive more attention and resources.
Draft the NRA report: Compile the findings into a comprehensive NRA report. This should include detailed analysis, risk ratings, and recommendations for mitigating identified risks.
Review and validation: Conduct a review and validation process involving key stakeholders to ensure the accuracy and completeness of the assessment. Seek feedback and make necessary adjustments.
Implement recommendations: Develop an action plan based on the NRA findings. Implement the recommended measures to mitigate identified risks, including legislative changes, enhanced supervision, and capacity building.
Monitor and update: Establish a mechanism for continuous monitoring of ML / TF risks. Regularly update the NRA to reflect changes in the risk environment, emerging threats, and new data.
Communication and transparency: Ensure transparency by communicating the NRA findings and action plans to all relevant stakeholders. This promotes cooperation and commitment to the implementation of AML / CFT measures.
How we can help
We have extensive experience working alongside the regulator in helping firms to review and remediate their AML / CFT frameworks.
Our team regularly assists on NRA exercises and can support you on sector-specific risk assessments to make sure your systems and controls meet requirements.
