Detailed Overview Of Risk Categories: Customer, Jurisdiction, Product And Channel

Customers and the products supplied by the company are subject to various dangers. To classify the risk into larger ML/TF concerns, the methods of supplying the products and services are also incorporated. This article elaborates on ‘Detailed Overview Of Risk Categories: Customer, Jurisdiction, Product And Channel’.

The huge quantity, sorts, and locations of consumers for whom accounts are to be established give birth to these broader risk categories. 

Compliance to AML/KYC standards

For continued due diligence and monitoring, the risks associated with the customers must be recognized and recorded. The organization’s account opening team and AML team must comply with AML/KYC regulatory standards, which require firms to identify and document customer-related risk factors and categories.

Board of Directors’ risked-based strategy

AML/CFT Regulations apply the regulatory framework for AML, requiring firms to focus on the areas where linked ML/TF risks are relatively significant to allocate resources most efficiently. As a result, the Board of Directors and Management must build an enabling environment for the effective execution of a risk-based strategy that considers the organization’s internal rules, processes, and risk criteria.

Detailed Overview Of Risk Categories: Customer, Jurisdiction, Product And Channel

Risk categories during onboarding

At the onboarding step, organizations profile each new client based on their judgment and the information collected via the CDD/KYC procedure. Customer risk, Jurisdiction risk, Product risk, and Channel risk are the risk categories that an organization confronts due to the large number and varieties of customers, goods, services, and channels utilized to offer services to the customers. These risk categories are discussed in detail in the below sections.

Final Thoughts

Customers or products supplied by companies are subject to various risks. To analyze the risks, the methods of supplying the products and services are also included in CDD/KYC procedures. This article elaborates on ‘Detailed Overview Of Risk Categories: Customer, Jurisdiction, Product And Channel’.

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