The Reserve Bank of India (RBI) today asked regulated entities (REs) to carry out internal risk assessment (IRA) of their business models and business relationships with customers to detect threats from money laundering (ML), terror financing (TF), and proliferation financing (PF).
There is always a likely exposure to elevated ML, TF, and PF risks in an ever-changing business environment and the increasing level of complexities in banking and financial products. The risks are further multiplied as emergent technologies and newer methods of payments enter the scene, RBI said in a guidance note to REs.
The enterprise-level risk assessment forms the bedrock of the approach, as it would help the REs understand how and to what extent they are vulnerable and decide the allocation of attention and resources to mitigate that risk.
The REs should have an appropriate level of control/mitigating measures to ensure that the elevated risks do not result in the financial institution being misused for ML/TF. These measures are also necessary to ensure that risks do not lead to loss of reputation and/or other financial losses for having allowed suspicious transactions routed through the banking channels/financial systems.
Referring to dual-level IRA, RBI said REs could be exposed to ML/TF/PF risk due to their specific business model—nature and complexity of their business. IRA should be commensurate with the nature and size of the RE, it added.
REs are also exposed to ML/TF risks as a result of entering into a business relationship with their customers or carrying out an occasional transaction for walk-in customers, RBI said.
First Published: Oct 10 2024 | 8:32 PM IST
