The Prevention of Money Laundering Act 2002 (PMLA) mandates that regulated entities adopt a risk-based approach to implement measures that manage money laundering (ML) and terrorism financing (TF) risks. To achieve this, every regulated entity must conduct an AML Business Risk Assessment to evaluate the ML/TF risks associated with their operations.
Entities must identify vulnerabilities related to ML/TF by considering various risk factors, including their customer demographics, the geographical regions they are linked to—either directly or through customers—and the products and services they provide.
Once these risk parameters are identified, the regulated entity should evaluate the likelihood of these risks materializing and the potential impact on the business if they do occur.
Through this risk analysis, the entity gains insight into the inherent ML/TF risks it faces. This inherent risk should be compared against the entity’s risk appetite, leading to the design of appropriate mitigation measures. The entity’s AML framework, which includes policies, procedures, and controls, must align with the findings of the AML Business Risk Assessment.
For a clearer overview, refer to our informative infographic that outlines the key aspects of the AML Business Risk Assessment, the essential first step in your AML journey.
NIYEAHMA Consultants LLP is a global consultancy firm specializing in AML compliance with a focus on PMLA through our division—AML India. We provide a full range of AML consultancy services to regulated entities, beginning with AML Business Risk Assessments and the customization of AML/CFT policies and procedures, as well as training teams to effectively implement AML programs.