AML Risk Assessment Framework

An AML risk assessment identifies, measures and mitigates money laundering and terrorist financing risks inherent to an organisation's customers, products, services, delivery channels and geographies.

The framework below is designed for financial institutions and obliged entities seeking a repeatable, auditable process that supports risk-based decision making and regulatory expectations.

Effective risk assessment requires clear governance. Senior management should own the risk appetite statement, while the compliance function executes the assessment and translates findings into policy.

Accountability lines must be documented, including escalation paths for residual risks and board-level reporting cycles to ensure oversight and resource allocation.

Identify inherent risks across customer segments (e.g., PEPs, high-net-worth individuals, corporates), product types (e.g., correspondent banking, digital wallets), delivery channels (e.g., remote onboarding) and jurisdictions.

Use internal data, typology reports, public sources and regulator guidance to compile an evidence base. Map risks to transaction patterns and control points within the customer lifecycle.

Apply quantitative and qualitative metrics to score risks. Quantitative inputs might include transaction volumes, value thresholds and frequency, while qualitative inputs cover control effectiveness and inherent exposure.

Develop a matrix to convert scores into risk categories (low / medium / high) and define tolerance thresholds that trigger enhanced due diligence or remediation activities.

Design controls proportional to the risk level: enhanced due diligence for high-risk customers, transaction monitoring tuning for high-volume corridors, and periodic independent reviews for complex product lines.

Automation and data-linking across systems reduce manual errors. Train front-line staff on red flags and provide compliance teams with decision-support tooling to ensure consistent application of mitigations.

Continuous monitoring and periodic independent testing validate control effectiveness. Use sample-based reviews, scenario testing and KPI tracking to identify control degradation.

Reporting should include trend analysis and a clear remediation plan for identified gaps, with timelines and owners. Regulators increasingly expect documented evidence of both assessment and follow-through.

Risk assessments are not one-off exercises. Schedule regular reassessments and incorporate emerging threats such as crypto-enabled schemes and trade-based money laundering.

Maintain a feedback loop from investigation outcomes into the assessment model to refine scoring and controls. This ensures the framework adapts to evolving typologies and regulatory expectations.