7 Common Mistakes to Avoid in BSA AML Risk Assessment

Before we start with the mistakes to avoid in BSA AML risk assessment, it is important to know what it actually is. The Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) guidelines have made it compulsory for financial organizations to examine and eliminate risks that come as a result of crimes like money laundering. BSA AML risk assessment is all about calculating the chance of a crime happening in a company’s operations and its client base. It’s a great way that helps in identifying weaknesses, putting controls, and following regulatory needs. By performing risk assessments, businesses are able to understand how exposed they are to risks and how they can change their strategies to overcome them. Now that we know what BSA AML risk assessment is let’s explore the 7 mistakes that must be avoided as they can reduce the effectiveness of this tool. 

• Neglecting Comprehensive Risk Assessment

One of the major mistakes in BSA AML compliance is that companies do not conduct detailed risk assessment. A few businesses quickly go through this stage and do not pay much attention to it which leads to them missing out on important risk indicators and weaknesses in their systems.  It is very important to keep in mind that powerful risk assessment is what lays the main ground for making effective strategies for risk management.

• Overlooking Customer Risk Scoring

Each client carries a different level of risk when it comes to crimes like money laundering. But a few companies make use of a single approach for all types of different risks and this is wrong! Every risk requires a different approach therefore, the AML risk scoring methods must be changed accordingly. When companies don’t change risk scores according to each customer they put themselves at a higher AML risk. Therefore, every customer must be examined deeply. 

• Ignoring Transaction Monitoring

Risk management very highly depends on carefully done monitoring of transactions. But some companies do not focus on this either and do not perform monitoring at all times. Due to this, they end up missing out on important data that might signal warnings.

• Lack of Ongoing Review

For successful BSA AML compliance monitoring and reviewing have to be performed at all times as everything cannot be covered in one single check. Many businesses do not treat it that way and because of this they also fail to counter new threats and regulatory changes as they are not up to date. 

• Failure to Document Processes

Documentation is extremely important when it comes to BSA AML compliance. But again, many companies ignore this aspect of risk assessment and fail to document it. If any audits are performed, they do not have evidence to give.

• Siloed Approach to Risk Management

In a few companies, BSA AML compliance is treated separately from other functions that manage risk. Because of this approach, there are gaps in the risk assessment process. Therefore, it is quite important to integrate AML risk assessment into your risk management frameworks so there is coordination that leads to effective results. 

• Underinvestment in Training and Resources

Successful BSA AML compliance calls for skilled people who are aware of the resources and information needed. But many firms do not put money into training their staff about the new technologies and industry best practices which reduces the effectiveness of risk management. 

Is BSA AML Risk Assessment Worth It?

For FIs and businesses dealing with everyday transactions and working in risky areas, BSA AML risk assessment is definitely worth the investment. It allows them to follow the laws and comply, get rid of monetary risks, increase safety efforts, safeguard their reputation, and also make sure the business grows. It is an investment in the future of a company. 

Avoid Mistakes and Comply Now! 

BSA AML risk assessment is an important part of the compliance measures that are taken by Financial Institutions. If they avoid the 7 mistakes we have mentioned above, they will definitely be able to improve their risk management systems and make the most out of them. Check out the AML risk assessment services at AML Watcher now!