4.1.2. Products and Services Risk
Effective from 11/11/2021Under Article 4.1 of the AML-CFT Decision and Paragraph 16.2.3 of the Standards, LEH must identify, assess, understand, and mitigate the risk posed by the products and services they offer. The products and services risk is a critical component of an institutional-level risk assessment because customers engaged in illicit activity can seek to exploit the LEH to facilitate ML/FT and other types of financial crimes.
| 1. | IDENTIFY: LEH should identify the full list of products and services they offer. | |
| 2. | ASSESS: LEH should assign a risk rating to each product type identified above. Determining the risk of products and services should include a consideration of their characteristics and attributes and could include factors such as: | |
| • | Products or services that may inherently favor anonymity, or products that can readily cross international borders, such as cash, online money transfers, stored value cards, money orders and international money transfers by mobile phone. | |
| • | Products or services that have a very high or no transaction limit. | |
| • | The global reach of the product or service offered. | |
| • | The complexity of the product or service offered. | |
| • | Products or services that permit the exchange of cash for a negotiable instrument, such as a stored value card or a money order. | |
| 3. | CALCULATE EXPOSURE: The LEH should consider what proportion of its total products and services, and of total transactional activity, is associated with higher and lower-risk products and services. Where a LEH has large exposure to higher-risk products and services, its overall inherent risk will generally be higher. | |
| 4. | DOCUMENT: A LEH’s approach to categorizing risk should be clearly documented. The LEH should keep detailed records of its assumptions, statistics used to complete this process, and the resulting analysis and outcomes. | |