Is there a risk of sanctions being imposed on a regulated organisation or reporting entity if they fail to mitigate or address residual risks, even after properly applying an enterprise-wide ML/FT policy and procedures?
Residual risks can take various forms, and penalties depend on the nature and severity of unaddressed risks. Adopting a risk-based approach does not guarantee the elimination of all ML/TF risks, as some residual risk will always remain.
The risk-based approach helps optimise limited resources to manage these risks. If an entity enforces strong policies, conducts KYC, monitors transactions, screens clients, and carefully onboards customers, penalties should be unlikely. However, ineffective application of controls can still lead to fines and penalties.
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Thank you so much for the clarification.
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