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Questions and Answers
What is the minimum frequency for reviewing the risk assessment exercise?
What is the minimum frequency for reviewing the risk assessment exercise?
The Designated Director can be the same as the Principal Officer.
The Designated Director can be the same as the Principal Officer.
False
What is the main objective of the Risk Based Approach (RBA) implemented by Reporting Entities (REs)?
What is the main objective of the Risk Based Approach (RBA) implemented by Reporting Entities (REs)?
Mitigation and management of risks
The outcome of the risk assessment exercise shall be put up to the _______________________ or any committee of the Board to which power in this regard has been delegated.
The outcome of the risk assessment exercise shall be put up to the _______________________ or any committee of the Board to which power in this regard has been delegated.
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Match the following terms with their descriptions:
Match the following terms with their descriptions:
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Who nominates the Designated Director?
Who nominates the Designated Director?
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REs shall apply a Risk Based Approach (RBA) for mitigation and management of risks identified through national risk assessment only.
REs shall apply a Risk Based Approach (RBA) for mitigation and management of risks identified through national risk assessment only.
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The _______________________ shall implement a CDD programme, having regard to the ML/TF risks identified and the size of business.
The _______________________ shall implement a CDD programme, having regard to the ML/TF risks identified and the size of business.
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Why should REs monitor the implementation of controls?
Why should REs monitor the implementation of controls?
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Who should the name, designation, and address of the Designated Director be communicated to?
Who should the name, designation, and address of the Designated Director be communicated to?
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Study Notes
Risk Management Overview
- Risk-based approach required for Reporting Entities (REs) to assess customers.
- Customers categorized into low, medium, and high-risk based on risk perception.
- Broad principles for risk-categorization can be established by REs.
Risk Categorization Factors
- Parameters for categorization include:
- Customer identity
- Social and financial status
- Nature of business activity
- Customer’s business information and location
- Geographical risks associated with customers and transactions
- Types of products/services and delivery channels
- Transaction types: cash, cheque, wire transfers, etc.
- Verification of identity documents through online services can be included.
Confidentiality of Risk Information
- Risk categorization outcomes and reasons must remain confidential to prevent tipping off customers.
- Information collection from customers should align with non-intrusive KYC policies.
Customer Identification Procedures (CIP)
- REs must identify customers when:
- Initiating account-based relationships.
- Policy framework must align with PML Act/Rules to combat risks (money laundering, terrorist financing, etc.).
Key Elements of KYC Policy
- Customer Acceptance Policy.
- Risk Management strategy.
- Customer Identification Procedures (CIP).
- Transaction Monitoring.
Money Laundering and Terrorist Financing Risk Assessment
- REs required to conduct periodic ML and TF risk assessments.
- Assessments should consider relevant risk factors to determine overall risk level and mitigation strategies.
- Internal risk assessments must document sector-specific vulnerabilities.
Documentation and Review of Risk Assessment
- Risk assessment documentation should be proportional to the RE's nature, size, and complexity.
- Frequency of assessments determined by the Board; must be reviewed at least annually.
- Assessment outcomes must be reported to the Board and available to competent authorities.
Risk-Based Approach (RBA) Implementation
- REs must adopt Board-approved policies for risk management and control.
- A Customer Due Diligence (CDD) program should consider identified ML/TF risks and business size.
Designated Director's Role
- The "Designated Director" is accountable for compliance under the PML Act.
- Nominated by the Board, their details must be reported to FIU-IND and RBI.
- Principal Officer cannot serve as the Designated Director.
Principal Officer's Responsibilities
- Ensure compliance and monitor transactions.
- Responsible for information reporting as mandated by law and regulations.
- The Principal Officer's details must also be communicated to the FIU-IND.
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Description
Assess your knowledge on risk-based approach for Reporting Entities, customer categorization, and risk-categorization factors. Learn how to identify low, medium, and high-risk customers based on various parameters.
