Anti-Money Laundering: Challenges of Customer Risk Rating


Determining the risk rating for each customer is a key component of a financial institution’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program.

Regulators expect financial institutions to have a holistic understanding of each customer so that they can appropriately monitor for and report suspicious activity, said Federal Reserve and FinCEN panelists at the 2015 Florida International Bankers Association (FIBA) Anti Money Laundering Compliance Conference. By knowing each customer’s risk rating, banks can decide on the appropriate level and frequency of due diligence needed to manage that risk. However, it can be difficult for a bank to see an enterprise view of the customer across all organizational lines that overlap.

One particular area noted by the panelists is how banks aggregate the risk related to correspondent accounts or affiliated companies. The expectation is that jurisdictional risk is taken into consideration as well as products utilized by the affiliate company and/or correspondent bank; however, conducting this due diligence can be a challenging process for banks.

To help bank management and compliance officers identify and evaluate risks, the panelists suggested institutions should establish a comprehensive risk assessment process and implement appropriate controls so that the assessment is applied consistently throughout the institution as part of the bank’s BSA/AML program.  Increasing information sharing across service lines within the institution, as appropriate and with proper controls in place, may help banks to understand and manage customer data, with an emphasis on completeness, accuracy, timeliness and risk management.

Jason Chorlins, CPA, CFE, CAMS, CITP, is a Risk Advisory Services Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.

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