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Effective risk assessment is now obligatory for AML compliance

Effective risk assessment

A new Anti-Money Laundering (AML) Act was adopted in Bulgaria in March 2018 to transpose the Fourth Anti-Money Laundering Directive into national legislation impacting companies across various industries.

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Effective risk assessment is now obligatory for AML compliance

Risk assessment is an obligatory mitigation measure for a wide range of companies in line with the anti-money laundering regulations effective in the country. 

KPMG’s Anna Ilieva-Vaklinova, Senior Manager, Advisory, commented:

“The 4th AML Directive and the newly adopted AML Act require appropriate and effective AML mitigating measures and safeguards that are proportionate to risk.

For the obliged entities the requirement for a risk-based approach translates into:

  • a formalized and documented risk assessment adapted for the specifics of the business, geographies of operation, products and services, channels of distribution
  • a holistic risk assessment approach and not a tick-box exercise
  • written operational policies and procedures corresponding to the applicable AML risks 
  • a requirement for regular updates to the risk assessment so that to ensure its business relevance.”

In respect to the provisions for establishing and verifying customers and beneficial owners, the risk-based approach of the AML Act envisages:

  • customer due diligence regimes in accordance with risk factors, allowing for simplified due diligence procedures only for evidence-based low risk circumstances 
  • enhanced customer due diligence requirements and mitigating controls for higher risk considerations
  • stringent requirements for monitoring of higher risk customers and transactions
  • trainings on how to practically conduct customer due diligence; and
  • ongoing monitoring attuned to risk circumstances.

The AML Act echoes the requirement of the Fourth AML Directive for a strong emphasis on a risk-based approach aiming at increased efficiency of the AML measures adopted at EU, national and entity level. The AML risk assessment process or an update to it is to be undertaken by a large spectrum of obliged entities. The risk assessment is a key milestone for the development of corporate governance processes, policies and procedures in regards to anti-money laundering and counter-terrorist financing.

© 2018 KPMG Bulgaria OOD, a Bulgarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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