Having a risk-based approach is central to a financial institution understanding the money laundering and terrorist financing risk to which they are exposed. The development of a money laundering and

Question

Options

• Aproduct risk.
• Bcredit risk.
• Cgeographic risk.
• Dcustomer risk.
• Eliquidity risk.

• A
  82% (50)
• B
  7% (4)
• E
  11% (7)

Explanation

The CAMS 6th Edition clearly identifies a risk-based approach as the cornerstone of effective AML/CFT programs. Risk assessments should consider various risk factors that directly influence exposure to ML/TF. Product risk (A): Certain products or services may present higher ML/TF risks, such as private banking, correspondent banking, or cash-intensive products."Products and services offered, and their inherent risk levels, must be assessed as part of the risk-based approach."(CAMS 6th Edition, AML Compliance Program, Risk Assessment) Geographic risk (C): Jurisdictions where the customer operates or where transactions are conducted may present higher or lower risks due to factors such as weak AML regulations or high corruption."Geographic risk considers where a customer is located and/or where transactions occur, referencing countries with increased risk, such as those identified by the FATF."(CAMS 6th Edition, Risk Assessment Factors) Customer risk (D): The type of customer, such as PEPs, non-residents, or companies with complex structures, may present higher ML/TF risks."Customer risk assessment is based on the customer's profile, activity, and ownership structure, and is a critical component in risk-based monitoring."(CAMS 6th Edition, CDD/EDD)

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