Since its last regulatory examination, a financial institution has aggressively grown by adding profitable new...

A money laundering risk assessment is a crucial component of an effective anti-money laundering (AML) program. It involves identifying, assessing, and understanding the specific risks related to money laundering and terrorist financing that the institutionmay face. A risk assessment helps the institution to design and implement appropriate controls, policies, procedures, and training to mitigate the risks. A risk assessment should be updated regularly and whenever there are significant changes in the institution’s business activities, products, services, customers, or geographic locations. In this scenario, the financial institution has experienced significant deficiencies in its AML program during a recent regulatory examination. The deficiencies were primarily attributed to the lack of oversight by the institution’s leadership in implementing adequate controls over the new products and services that were added as part of the institution’s aggressive growth strategy. To correct these weaknesses in the AML program, the leadership should first address the area of international control known as “Money laundering risk assessment” (Option C). By conducting a new and comprehensive risk assessment, the leadership can identify the potential vulnerabilities and gaps in the AML program that may arise from the new products and services. The risk assessment can also help the leadership to prioritize the actions and resources needed to address the deficiencies and enhance the AML program. Once the risk assessment is completed, the leadership can then work on updating the AML policy, providing adequate training, and ensuring sufficient compliance staff to implement and monitor the controls.

1, Chapter 2: Risk Assessments

2, Section 2: Anti-Money Laundering Compliance Program

3, Question 145