AML/CTF series: Why is an AML/CTF Risk Assessment required - and how do law firms do one?
At the heart of law firms’ anti-money laundering (AML) and counter-terrorism financing (CTF) obligations is a risk assessment. AUSTRAC expects every reporting entity to document how money laundering or terrorism financing risks may arise in their business, and what controls will be used to address them.
The risk assessment is the foundation of your firm’s AML/CTF program. It justifies:
why you treat some clients as low risk;
why you apply enhanced due diligence in other cases; and
how you allocate training and resources.
Without a risk assessment, your AML/CTF program has no anchor.
At minimum, your firm-wide risk assessment should look at:
the types of clients your firm is dealing with;
the types of designated services your firm provides (see article 2 (What exactly counts as a “designated service” for law firms (and what doesn’t)?));
where services are provided (overseas clients, or purely domestic); and
how services are delivered (face-to-face or remote/online).
Each factor should be ranked as low, medium or high risk. The risk assessment methodology your firm uses must be adaptable to changes that affect your firm’s risk level.
A clear risk assessment will make decisions easier in practice. If a client matter feels unusual, your firm can point to the risk assessment and your AML/CTF program to support saying “no” or applying enhanced customer due diligence checks.
We are well placed to assist with your firm’s AML/CTF requirements – give our AML/CTF team a call.
Paul Gray
Principal
T 03 5225 5231 | M 0414 195 886
E pgray@ha.legal
Hugo Le Clerc
Senior Associate
T: 03 5225 5213 | M: 0438 089 334
E: hleclerc@ha.legal
