National Risk Assessment (NRA) is an effective tool that can be applied across both private and public sectors to understand the level of money laundering and terrorist financing (ML/TF) risks within a country.
FATF data from April 2022 reveals that the level of compliance with “identifying, assessing and understanding” money laundering risks is limited to just 11 countries— 8.5% of those assessed.
The reasons for this non-performance can be due to;
As such, government agencies that hold positions of power within countries to conduct NRAs must take action to do so. Let’s take a look at why first.
The importance of a national risk assessment
As stated before, NRAs are vital for countries to shed light on the money laundering and terrorism financing risks that may be occurring within their borders. This is achieved by involving several public and private organisations within the country.
Here is why an NRA is important for countries in the contemporary world.
An NRA can help ensure a shared understanding between relevant authorities and other stakeholders, whether public or private, about the state of ML/TF risks.
It also helps policymakers effectively match potential ML/TF risks with the appropriate mitigation strategies and optimise resource allocation.
An NRA also contributes to the formation of effective anti-money laundering and counter-financing of terrorism (AML/CFT) plans to address critical threats and vulnerabilities.
A well-organised NRA also acts as a tool to drive accountability in AML/CFT efforts so that all involved parties are well-informed of their role and responsibilities, resulting in higher risk resilience overall.
The importance of a national risk assessment
As stated before, NRAs are vital for countries to shed light on the money laundering and terrorism financing risks that may be occurring within their borders. This is achieved by involving several public and private organisations within the country.
Here is why an NRA is important for countries in the contemporary world.
An NRA can help ensure a shared understanding between relevant authorities and other stakeholders, whether public or private, about the state of ML/TF risks.
It also helps policymakers effectively match potential ML/TF risks with the appropriate mitigation strategies and optimise resource allocation.
An NRA also contributes to the formation of effective anti-money laundering and counter-financing of terrorism (AML/CFT) plans to address critical threats and vulnerabilities.
A well-organised NRA also acts as a tool to drive accountability in AML/CFT efforts so that all involved parties are well-informed of their role and responsibilities, resulting in higher risk resilience overall.
Factors affecting the success of NRAs
A risk assessment, at the best of times, is no easy feat to execute. Assessments with regard to national risk have a wide variety of moving parts embedded in both the private and public sectors that can spell the success or failure of an effective risk assessment.
Let’s take a look at the most common factors that affect the success of NRAs.
An effective NRA is a function of three factors; threats, vulnerabilities, and consequences. Understanding and predicting potential consequences is highly complex and nigh impossible, so most countries focus on discerning threats and vulnerabilities.
One of the most common issues with NRAs is the lack of quality in the data. This can significantly affect the accuracy and reliability of NRAs, resulting in less-than-ideal outcomes when implementing risk management strategies. The FATF recommends using a combination of qualitative and quantitative information as a means for minimising this eventuality.
When it comes to the methodologies of conducting NRAs, many countries use the World Bank’s tool. This contains eight modules that cover a variety of topics related to ML/TF risks. The World Bank may also provide assistance for countries that aim to conduct NRAs.
Factors affecting the success of NRAs
A risk assessment, at the best of times, is no easy feat to execute. Assessments with regard to national risk have a wide variety of moving parts embedded in both the private and public sectors that can spell the success or failure of an effective risk assessment.
Let’s take a look at the most common factors that affect the success of NRAs.
An effective NRA is a function of three factors; threats, vulnerabilities, and consequences. Understanding and predicting potential consequences is highly complex and nigh impossible, so most countries focus on discerning threats and vulnerabilities.
One of the most common issues with NRAs is the lack of quality in the data. This can significantly affect the accuracy and reliability of NRAs, resulting in less-than-ideal outcomes when implementing risk management strategies. The FATF recommends using a combination of qualitative and quantitative information as a means for minimising this eventuality.
When it comes to the methodologies of conducting NRAs, many countries use the World Bank’s tool. This contains eight modules that cover a variety of topics related to ML/TF risks. The World Bank may also provide assistance for countries that aim to conduct NRAs.
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In product training
The ability to export assessments to MS Word
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2 users (Account Admin, Org & BU Admin, Assessor, Viewer)
2 concurrent assessments
2 organisations & business units
In product training
The ability to export assessments to MS Word
MS Excel treatment plans
White label SECTARATM platform
White-label exported documents
Audit records
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The FATF Recommendation 1 details the need for countries to “identify, assess and understand” the ML/TF risks they face. This means that governments have the obligation to ensure that the AML/CTF strategies in place address the identified risks.
While there is no clearly defined schedule for conducting NRAs, the general guideline is that it should be reasonably up to date.
