OTHER ASSESSMENT SOURCES AND TOOLS

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Local Knowledge


Local knowledge of the risk issues relating to any particular higher risk country can be invaluable and allow you or your organisation to mitigate the risk. This may be through you, your organisation, or a branch of your organisation being located in that country and therefore being aware of the issues that may cause that country to be rated as higher risk, and being party to local information allowing mitigation of that risk.

Access to local media can also be a valuable source of information, particularly on a real time basis.




Country Ratings Tables


Country risk ratings tools are often developed in house in major financial institutions or are available on the internet. They will use various data sources relating to country risk and weight these depending upon the perceived seriousness of risk to produce a ratings table that measures country risk either numerically, with fixed banding categories, or a traffic light system.

Financial institutions that undertake a significant amount of transactions in a relatively short period of time will need to rely upon some form of rating system for geographical risk and set its risk assessment parameters accordingly.

However, caution should be employed when generally defining many jurisdictions as being ‘low risk’ because they do not rate poorly on any of the data sources comprising the risk rating tool and, consequently, that due diligence and risk controls will be eased off for any customer or customer business related to those ‘low risk’ jurisdictions.

Over the last few years, international banks located in many of those countries that would normally be deemed ‘low risk’, especially Western European and North American countries, have admitted to massive violations of money laundering controls and sanction busting over relatively long periods of time. One example would be Estonia, which will normally rate low risk because it does not fall into any higher risk categories, was not long ago subject to enormous amounts of money laundered from Russia.




Reports & Profiles


In addition to the FATF Evaluation Reports, IMF and World Bank, Transparency International and Narcotics Reports, independent commercially collated Country Risk Reports and Profiles can provide financial institutions deeper dive information where the need to understand the country risk posed is on a case by case basis.

Indeed, for example, by better understanding the limits of sanctions, or the nature of trade of any particular country, the financial institution can mitigate risk and take on customers that might normally be refused where a risk rating tool is used, or a culture of de-risking is prevalent.