When to Update Your Anti-Money Laundering Risk Assessment

B

(10)

According to regulatory guidance and best practices, anti-money laundering (AML) risk assessments should be conducted on a periodic basis to ensure that the risks associated with money laundering and terrorist financing are properly identified, assessed, and mitigated. The frequency of updating AML risk assessments may vary based on several factors, including changes in the regulatory environment, business operations, customer base, and external risks.

Regarding the options provided in the question, let's analyze them:

A. Every two years: This option suggests a fixed timeline for updating AML risk assessments, which may not be appropriate in all cases. Two years might be a reasonable timeline for some businesses, but it may not be sufficient for others that operate in high-risk jurisdictions, have a high volume of transactions, or experience significant changes in their operations. Therefore, it is not the best answer.

B. After a merger or acquisition: This option is a valid reason for updating an AML risk assessment, as mergers and acquisitions can significantly alter the risk profile of a business. The newly formed entity may have new products, customers, or relationships that need to be assessed for money laundering risks. Therefore, this could be the correct answer.

C. When the board of directors changes: The board of directors is responsible for overseeing the overall management and direction of a company, including its AML program. However, changes in the board of directors alone do not necessarily warrant an update to the AML risk assessment. Instead, changes in the company's risk profile, regulatory requirements, or business operations should be the determining factors. Therefore, this is not the best answer.

D. When instructed to by the Financial Action Task Force (FATF): FATF is an intergovernmental organization that sets global standards for AML and counter-terrorist financing (CFT). Although FATF recommendations are widely recognized, they are not legally binding. Therefore, waiting for FATF to instruct a company to update its AML risk assessment may not be sufficient, and it is not the best answer.

In conclusion, the correct answer to this question is B. After a merger or acquisition, as it is a valid reason to update an AML risk assessment. However, it is worth noting that other factors such as changes in the regulatory environment, business operations, and customer base should also be considered when determining the frequency of updating AML risk assessments.