What is the primary action a financial institution should take before formulating its anti-money laundering program?
Correct Answer: A
A comprehensive risk analysis is the first and most important step in developing an effective anti-money laundering program. A risk analysis helps a financial institution identify and assess its exposure to money laundering and terrorist financing risks, based on its products, services, customers, geographic locations, and other factors. A risk analysis also enables a financial institution to tailor its policies, procedures, controls, and training to mitigate the specific risks it faces. A risk analysis should be conducted periodically and updated as necessary to reflect changes in the institution's risk profile.
Reference:
ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.1: Risk-Based Approach, p. 29-30 ACAMS Risk Assessment, What is Anti-Money Laundering (AML) Risk Assessment?
How to Conduct an AML Risk Assessment - Assess Key Risk Drivers