Micro-jurisdictional risk: One of AML’s missing links

Micro-jurisdictional risk: One of AML’s missing links

High level jurisdiction risk assessments alone are often too broad in scope to include in anti-money laundering policies; Micro-jurisdictional risk analysis could help allay model bias.

  • Some aspects of AML policies and procedures are in need of an overhaul, to capture variables important to making accurate analysis
  • Low risk jurisdictions have high-risk neighbourhoods and, conversely, not all customers and transactions from high-risk jurisdictions warrant heightened scrutiny
  • Financial institutions should go beyond existing AML guidelines and apply a more granular risk-based approach to geography to stay ahead of upcoming best practices
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Why Banks Must Evolve their AML Process to Manage Micro-Jurisdictional Risk

Why Banks Must Evolve their AML Process to Manage Micro-Jurisdictional Risk

United States sanctions policies have evolved over the years, from country-wide embargos to more nuanced approaches targeting specific entities. According to Jacob J. Lew, Secretary of the Treasury, the sanctions implemented today are more focused on bad actors while trying to limit the negative externalities. Lew described his view on the traditional sanctions model at the Carnegie Endowment for International Peace which is eloquently summarized by this quote:

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