AML Business Risk Assessment: Your journey to comply with PMLA, 2002 begins here!

The Prevention of Money Laundering Act 2002 (PMLA) requires regulated entities to adopt a risk-based approach while implementing mitigation measures to manage the money laundering and terrorism financing risks. To do so, every regulated entity needs to assess the ML/FT risk their business is exposed to, i.e., AML Business Risk Assessment.

The regulated entities must identify the ML/FT vulnerabilities considering the risk factors such as its customer base, the geographies the entity is associated with – directly or through customers, the products and services it offers, etc.

Having identified the risk parameters, the regulated entity must assess the possibility of that risk materializing and its potential impact on the business if such risk occurs.

With this risk analysis, the regulated entity understands the inherent ML/FT risk faced by its business. Such inherent risk must be compared with the entity’s risk appetite, and appropriate mitigation measures must be designed accordingly. The entity’s AML framework, including policies, procedures and controls, must be in absolute sync with the AML Business Risk Assessment.