Risk Assessment

Lisa Arquette, recently appointed to Associate Director, Anti Money Laundering and Financial Crimes at FDIC, shared advice on what to consider in risk assessment at ABA's 2005 Money Laundering Enforcement Conference. While her comments were targeted to BSA compliance, her suggestions are valid for any risk assessment process.

Serving new customers presents more risk than serving known and established customers. Any transaction conducted or requested by a new customer presents extra risk. When that transaction involves moving money, such as wire transfers, the risk is even higher. Similarly, conducting transactions for non-customers presents risk that a customer identification program won't mitigate or control.

Another source of increased risk is a demographic change or a product change. Changes in your market and in the products you offer must all be managed at a higher risk level. In the BSA context, these changes increase risk whether the institution or the customer initiates them. In short, watch customers for personnel changes, product changes and transaction changes but don't forget to monitor similar change within your institution.

Finally, change, whether in personnel, software, or organization, presents risk. Arquette pointed out that a key personnel loss can cripple or stop BSA compliance.

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 15, 12/05