Geographic Risk in Anti-Money Laundering

“Geographic Risk in Anti-Money Laundering” A sponsored Report

<style=”text-align: justify;”>WHAT: Clingstone co-sponsors a Report on Geographic Risk in Anti-Money Laundering prepared by Dr Dionysios Demetis, a lecturer at University of Hull with research interests in AML and Systems Theory. Dr Demetis is one of the leading domain experts who was a key contributor to Spotlight EU project, as well as the GATE EU Project targeting Money Laundering and Terrorist Financing. Dr Demetis is an author of a large number of AML research deliverables for the European Commission and the Future of Identity for the Information Society (FIDIS)

FOR WHOM: This report would be of interest to senior level Compliance and Operations managers working on solutions to model a ‘risk-based’ approach to AML for their organisation.

WHY: This Report can help those who:

  • 1) have not yet transitioned from the rules based to the risk based approach to AML
  • 2) experience a very high number of ‘false positives’ in their existing AML solutions

 A Review of challenges and recommendations in modelling geographic risk for Anti-Money Laundering and Counter Terrorist Financing

 

Geographical Risk in AML ImageThe importance of geographic risk

Geographic risk is important for financial institutions worldwide. In the context of economic crime, and Anti-Money Laundering in particular, this importance is based on two factors. First, the regulatory requirement to monitor the exposure of a financial institution to the risk of conducting business with institutions and individuals based in certain locations. Secondly, from a management perspective that involves a real business issue: to protect a financial institution from loss, and shield its reputation.

This report examines the current status quo of geographic risk in economic crime and looks more specifically into the domains of Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). This report analyses the Bank Secrecy Act (BSA) Examination Manual issued by the Federal Financial Institutions Examination Council (FFIEC) of the US Government, the most comprehensive document upon which AML audits are based. Based on the FFIEC manual, the report extracts several basic dimensions of geographic risk and uses different sources to consolidate key aspects (e.g. Financial Action Task Force, IMF, BCBS, World Bank, HM Treasury, etc).

 

Introduction to AML/CFT and Geographic Risk

While the estimates of the scale of Money Laundering (ML) vary globally, with some considering it to be the world’s 3rd  largest market, one thing is certain: the problem is not going away. On the contrary, it is becoming more complex as a result of the regulatory onslaught that resembles a Denial of Service attack on business, the introduction of new guidelines, recommendations, and technologies, and the persistence of money launderers. In reality, never before has so much legislation had so little effect in curbing a problem. But from a business perspective…

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