Risk-Based Approach – Guidance for Money Service Businesses

Risk-Based Approach – Guidance for Money Service Businesses - July 2009may be shared to best effect. For example, which body or bodies are best placed to provide guidance toMSBs about how to implement a risk-based approach to anti money laundering and counter-terroristfinancing.67. A list of potential stakeholders may be considered to include the following:Government – this may include legislature, executive, and judiciary.Law enforcement agencies - this might include the police, customs etc.The financial intelligence unit (FIU), security services, other similar agencies etc.Financial services regulators.The MSB private sector – this might include MSBs companies or professional associations.The public – arrangements designed to counter money laundering and terrorist financing areultimately designed to protect the law-abiding public. However these arrangements may also actto place burdens on customers of MSB firms.Others – those who are in a position to contribute to the conceptual basis underpinning the riskbasedapproach, such stakeholders may include academia and the media.68. Clearly a government will be able to exert influence more effectively over some of thesestakeholders than others. However, a government will be in a position to assess how all stakeholders can beencouraged to support efforts to combat money laundering and terrorist financing.69. A further element is the role that governments have in seeking to gain recognition of therelevance of a risk-based approach from competent authorities. This may be assisted by relevant authoritiesmaking clear and consistent statements about the risk-based approach on the following:MSBs can be expected to have flexibility to adjust their internal systems and controls taking intoconsideration lower and high risks, so long as such systems and controls are reasonable.However, there are also minimum legal and regulatory requirements and elements that applyirrespective of the risk level, for example suspicious transaction reporting and minimumstandards of customer due diligence.Acknowledging that a MSB‟s ability to detect and deter money laundering and terrorist financingcan sometimes be necessarily limited and that information on risk factors is not always robust orfreely available. There should therefore be reasonable policy and supervisory expectations aboutwhat a MSB with good controls aimed at preventing money laundering and the finance ofterrorism is able to achieve. A MSB may have acted in good faith to take reasonable andconsidered steps to prevent money laundering, and documented the rationale for its decisions,and yet still be abused by a criminal.Acknowledging that not all high risk situations will be identical and as a result will not alwaysrequire precisely the same type of enhanced due diligence.18 - © 2009 FATF/OECD