Conducting a national or sector-specific risk assessments is one of the cornerstones of an appropriate and effective risk-based approach by a country to detect, prevent and disrupt financial crime. A well-executed money laundering and terrorist financing (ML/TF) or proliferation financing (PF) risk assessment can help a country to both identify where financial crime risks are the greatest and detect emerging risks to address them at the earliest opportunity. Understanding the extent of a country’s risk exposure and the measures applied to mitigate those risks benefits all stakeholders – from financial services and Designated Non-Financial Services Businesses and Professionals (DNFBP) supervisors, company and beneficial ownership registries, financial intelligence units (FIUs), government agencies, law enforcement agencies, non-profit organisations, civil society and members of the private sector.
 

The Council of Europe (CoE) Economic Crime and Cooperation Division (ECCD)’s Methodologies are designed to reflect the classic components of conducting a risk assessment, allowing flexibility during the assessment process to take account of data quantity and quality considerations and diversity of sector and subsector risk profiles. The CoE ECCD’s Methodologies are designed based on a data-driven approach, with sufficient flexibility to incorporate both qualitative and professional judgment-based information, and solution-oriented focus towards the mitigation of calculated residual risks.
 

The approach applied by the Methodologies is designed to identify and challenge assumptions around perceived levels of risk and overall effectiveness of controls intended to mitigate them. The CoE ECCD’s risk assessment approach incorporates inclusive and participatory approach through use of national coordinating mechanism, ongoing interaction with both public authorities and the private sector, and robust review of preliminary findings from public and private sector focused groups. The CoE ECCD’s Methodologies also encourage consideration of aspects such as financial inclusion and the unintended consequences of activities such as de-risking.
 

The CoE ECCD’s Methodologies aim to focus assessment findings in a prioritised and risk-based fashion which reflects the country’s overall risk appetite, which is logical, user-friendly and foundational for subsequent national action plans and prioritisation of future work by authorities.

The CoE ECCD supports jurisdictions seeking to undertake an initial risk assessment, or update an existing risk assessment by providing training and advice in the application of its own tools in the following areas:

• ML/TF National Risk Assessment 
• ML/TF risk exposure of Legal Entities and Arrangements 
• Virtual Asset and Virtual Asset Service Providers ML/TF risk assessment 
• DNFBPs (different sectors) sectoral ML/TF risk assessments
• ML/TF risks associated with the use of cash
• Assessing risks of abuse of NPOs for TF purposes
• Cross-Border ML/TF Risks
• Assessing ML/TF risk associated with organised crime
• Proliferation Financing National Risk Assessment
• National Corruption Risk Mapping

The CoE ECCD provides support to jurisdictions seeking to undertake a ML/TF or PF risk assessment through ongoing expert support and provision of an adaptable and agile methodologies and guidelines. Designed to support capacity-building, the support provided by the CoE ECCD includes comprehensive training on the use and application of the respective tools to be used to support the assessment.  Additional support, depending upon the assessing country’s needs, would include:

• Review of proposed scoring, 
• Instruction on tool usage, 
• Moderation of focus group sessions, 
• “Trouble-shooting” support as needed, throughout the assessment process
• Expert support for the review of draft reports, and 
• Advice on the formulation of preliminary action plans, to reflect both country’s risk appetite and overall risk-based approach towards mitigation of ML/TF risks.