Prevention and Control of Money Laundering – A Risk Based Approach
Author:
Ileana Adriana TOTOLICI
JEL:
F23, K14, M42
DOI:
Keywords:
money laundering, terrorism financing, suspicious transactions, risk, client, information analysis
Abstract:
Taking into account the fact that, according to the legislation in force, one of the financial auditor’s attributions is to detect the suspicious transactions and the possibility that a client company may be involved in money laundering and / or terrorism financing, this paper intends to underline the importance, the benefits but also the challanges of the risk based approach in this field and to point out some theoretical and practical aspects directely connected with this kind of approach.\r\n\r\nThus, the main idea of this research study is focused on the fact that risk based approach assumes the necesity that financial auditors identify and evaluate the potential risks of money laundering and / or terrorism financing generated by their clients and by the transactions they are performing. \r\nOne of the most important benefits of the risk based approach consists in avoiding to allot unnecessary resources for low risk cases. Accordingly, the measures to prevent and combat money laundering will obviously be proportional with the identified risks. Therefore, the attention will be focused on high vulnerability cases.\r\n\r\nSince the offenders intensely speculate the new opportunities permanently offered by the technical progress and business environment, the methods and techniques of money laundering never cease to evolve. That is why the strategy used by the financial auditors in order to identify the risks should be constantly revised and ought to be a dynamic, realistic and useful tool.\r\nMoreover, the process of including the clients in various risk cathegories must be a flexible one, so that if there are new pieces of information regarding a client, it should, if necessary, include the client in a higher or lower risk cathegory.\r\n\r\nAnother significant aspect consists in the necessity that the optimal risk rating to be assigned to a client should be the result of the logical addition of several aspects. It is important to gather all the available information regarding a client: the whole client’s economic activity, the geographical areas where the client and his partners are performing their business, details about products and services offered by the clients, their regular financial operations and the reason why unusual financial patterns occur, a suspicious client behaviour etc (it is proper to avoid the use of only fragmentary, isolated information about a client).