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BSP issues risk assessment guide

THE Bangko Sentral ng Pilipinas (BSP) has released a guidance paper that outlines the conduct of institutional risk assessment (IRA) of central bank-supervised financial institutions or BSFIs.

“Institutional Risk Assessment (IRA) is the cornerstone of risk-based approach to money laundering (ML), terrorist financing (TF), proliferation financing (PF), and sanctions risks prevention and mitigation,” it explained in the paper.

The central bank said IRA is a process using appropriate methodology to identify, analyze and understand the ML/TF/PF risks, including the risk of non-implementation, potential breach or evasion of targeted financial sanctions requirements, arising from the BSFI’s business activities and relationships.

Its findings should inspire effective and risk-focused resource allocation for anti-money laundering and countering terrorism and proliferation funding (AML/CTPF) as well as lead the creation and/or improvement of AML/CTPF policies, systems, controls and procedures.

Furthermore, the BSP said IRA makes sure that the AML/CTPF policies, systems, controls and procedures are appropriate for the BSFI’s operations and level of risk.

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It said BSFIs must follow any applicable regulatory requirements, such as the IRA, which requires that they: use a methodology appropriate to their risk and context, taking into account all relevant risk factors, including customers, countries or geographic areas of operations, products, services, transactions or delivery channels; adequately document their results and findings; and provide up-to-date information.

Additionally, they must recognize and evaluate any potential ML/TF/PF and sanctions risks associated with the creation and/or introduction of new goods and services, commercial strategies, distribution networks and technological advancements.

“Such risk assessment should be an integral part of the product or service development process and be performed prior to the launch of the new products, business practices or the use of new or developing technologies,” the Bangko Sentral noted.

It further said BSFIs must implement suitable procedures to manage and mitigate the risks associated with ML/TF/PF and sanctions based on the findings of the IRA and/or risk assessment of new products or business practices. These measures should be explicitly stated in the ML/TF/PF Prevention Program.

Part of risk-based supervision, the risk assessment must also be made available to the central bank during examinations and other times deemed essential.

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