Information for AML and Other Compliance Officers

When performing your firm’s KYC customer due diligence, the industry in which a business customer operates in would need to be assessed and ranked as part of your firm’s risk rating assessment.

Special consideration needs to be placed on the regulatory standards of the industry in which the customer operates.

KYC Customer Due DiligenceImage Source: BigStock

In addition, the level of anti-money laundering rules, regulation of the industry, and jurisdiction in which the customer operates in need to be assessed.

In general, the higher the level of regulation, the higher the money laundering risk of that industry or jurisdiction.

Industries that present higher money laundering risk concerns include:

  • Industries with low levels of regulation
  • Industries that are cash-intensive (i.e., money services business)
  • Industries in regions with low anti-money laundering laws

In their AML program and methodologies, most (if not all) financial service firms consider a well-regulated industry as having a low money laundering risk.

An unregulated and cash-heavy industry (e.g., payday advance lenders) will most likely earn a high risk “industry rating.”

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