MODULE 3 SAQ
AML UNIT 8 SAQ
Question 1
What is risk methodology?
Answer: Risk methodology is the approach (processes) that guide the risk assessment, i.e., it is the recipe
for designing the risk assessment.
Question 2
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What is an ML/TF risk assessment?
Answer: A risk assessment is the mechanism that can be used to construct an organisation’s risk-based
approach to managing ML/TF risks. It often maps onto the organisation’s general risk framework and
focuses on the risks associated with the business lines, jurisdictions of operation, customer base and risk
appetite.
Question 3
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What do you understand by the term ’risk appetite’?
Answer: It relates to the level of risk that an organisation is prepared to accept. It represents a balance
between the potential commercial benefits and the compliance costs of conducting that business activity,
as well as legal and regulatory risk considerations.
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Question 4
List five factors that should be considered when designing AML/CFT systems and controls within
an organisation.
Answer:
i. Customer, product and jurisdiction risks
ii. Distribution channels (face to face and non-face to face)
iii. Complexity and volume of transactions
iv. Process and system workflows
v. Operating environment
vi. Outsourced operations
vii. Agency, supplier and other third party relationships
Question 5
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Under the ISO 30001-2009 principles, what are the key steps in the organisational risk management
process?
Answer:
i. Risk identification
ii. Risk analysis
iii. Risk evaluation
iv. Risk treatment
Question 6
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Outline some of the key components
of a successful risk assessment methodology.
Answer:
i. It is supported by a clear statement of the operational procedures
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ii. Leverages on both internal and external information
iii. Easy to update and manage
iv. Can be used by, and easily explained to, staff working in the business units of the firm
Question 7
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Outline the key steps in a risk assessment methodology.
Answer:
i. Identify inherent money laundering and terrorism financing risks
ii. Assess risks, specifically the impact if a risk materialises and the likelihood that it will
iii. Review risk mitigants and controls that are systemic, or that operate through people and policies
iv. Agree an absolute or residual risk that is high to low, or other means of measuring and demonstrating
levels of perceived risks
v. Obtain agreement on this assessment from senior management and that the risks are within the risk
appetite set by the board
vi. Exit any relationships or activities that are not acceptable
vii. Document all of the steps above
AML UNIT 9 SAQ
Question 1
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What is required in a framework of systems and controls to manage firms risks?
Answer:
Effective systems, controls and policies
A clear policy for customer CDD requirements
Robust transaction activity monitoring
A clear and documented reporting process
A comprehensive compliance monitoring and reporting process
Relevant and timely staff training to maintain risk awareness
A process for ensuring that the firm stays up to date with legal and regulatory changes as well as
trends in AML/CFT typologies.
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Regular review and oversight of the framework and results by senior management
Question 2
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Outline the benefits to a firm of a risk-based approach.
Answer:
It allows the firm to concentrate finite resources on areas of greatest risk
It contributes to cost effectiveness of compliance activities
It requires that senior management are responsible for considering all risks to a firm and that
appropriate controls are applied
It supports a more commercially sensitive response to risk management
It requires the firm’s senior management to take responsibility for the management of firm risks.
Question 3
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What does a firm need to consider when drawing up a business-risk profile?
Feedback
Answer:
The skills, knowledge and experience of the firm’s senior management and staff
The complexity and control structure of the firm
The firm’s product portfolio
The nature of the firm’s customer base
The quality and implementation of internal business processes
The geographical spread of the firm and its operations
The distribution channels used
The level of outsourcing to be used
The risk appetite of the business.
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Question 4
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Identify the various risks a firm faces for non-compliance with AML/CFT regulations and laws.
Answer: Some suggested risks are listed below.
Criminal action against the firm and senior management
Regulatory enforcement
Legal action
Reputational damage
Concentration risk because of failures in sectors or products for example
Operational disruption and costs
Financial costs, direct and indirect
Commercial losses due to customer dissatisfaction
Civil liability under US anti-terrorism laws and other regulatory action
Question 5
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Who is accountable and responsible for a firm’s AML/CFT strategy and policies?
Answer: All the following parties have their role to play in setting and implementing a firm’s AML/CFT
strategy and policy.
the board or governing body
senior management
the compliance officers
the MLRO
supervisors and department managers
audit and compliance departments
staff – i.e., you.
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Question 6
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How do you assess the effectiveness of your strategy for combating ML and TF?
Answer: There should be a continual review process covering:
procedures to identify changes in customers’ characteristics
vulnerabilities of new products and services
staff training and awareness
monitoring of compliance reports and subsequent actions to be taken
engagement of senior management
the status of communication and relationship with your regulator and law enforcement agencies
number and frequency of regulatory breaches and confirmed criminal conduct
new product development
results of quality assurance monitoring including technology tests
complaints from stakeholders and customers
