Ach Risk Assessment Template
Ach Risk Assessment Template – The dynamic nature of sanctions risk—the result of nuanced sanctions requirements, complex corporate structures and transaction protocols, and imperfect insight into customer and related party data—makes managing a sanctions compliance program (SCP) a no-brainer. Companies must clearly understand their inherent sanctions risk and control effectiveness, regularly monitor regulatory changes and act accordingly whenever new sanctions risks arise or change.
One of the most effective ways to achieve this goal is to conduct a sanctions risk assessment (SRA). While every SRA is different, there are some common approaches to development and implementation that can and should be considered. Most importantly, the SRA must be updated to be effective.
Ach Risk Assessment Template
SRA is a key regulatory expectation, but not a regulatory requirement. The Office of Foreign Assets Control (OFAC) published the “OFAC Compliance Obligations Framework,”
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Which outlines five important components of SCP, one of which is the implementation of risk-based SRA. OFAC emphasizes that SRAs must:
OFAC recognizes that while all SRAs must have these key elements, each company will design and implement a unique SRA. The results of the SRA should also inform the SCP’s policies, procedures, internal controls and training to mitigate such risks.
Although the SRA must conform to the standards set forth in OFAC, the SRA shares some common features with the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) risk assessment. As such, firms can also take advantage of guidance from the Federal Finance Board’s BSA/AML Examination Guidelines section on conducting BSA/AML risk assessments.
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Finally, failure to implement an effective SRA may result in regulatory censorship and operating below standard SCPs, potentially leading to legal violations and fines.
The first step is to scope and develop the SRA methodology—specifically, legal entity, business team, customer, product, service, supply chain, geography, etc. will “score”.
A comprehensive SRA will cover all or most of the significant scope elements (see Table 1), where applicable, and typically used by more mature/sophisticated SCPs. This approach may require significant time and stakeholder involvement. In addition, this SRA can be done simultaneously or in phases, similar to several focused SRAs that are ultimately combined into one comprehensive SRA.
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A focused SRA is intended for those elements that pose the greatest risk of sanctions (see Table 1). This allows companies to be targeted and agile to quickly assess and mitigate risk. While this approach is typically used by the infant / developing SCP, it can also be used by mature SCP when new risks appear or when there is a new product offer, new business geography, etc. For companies starting with SRA focus, there must be. being the plan to eventually achieve a comprehensive SRA approach, especially within the framework of OFAC, which highlights the need for a comprehensive view of sanctions risk.
The most common methodology follows a conventional, three-phase approach—inherent risk, control effectiveness, and residual risk (see Figure 1).
This methodology must be applied to cover each element of the scope, finally reaching the assessment of the remaining risks of the company and culminating in the risk appetite of the company (see Table 2).
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When choosing a data source, data must be collected in each element of the defined scope from internal and external data sources, where applicable, for the SRA time period. Internal data can come from sources such as customer databases, transaction records, trust funds, and product inventory. External data—such as industry attitudes about product risk, jurisdictional corruption indices, and regulatory actions/punishments—can provide a quantitative lens to assess internal data.
If data is required and is unavailable or incomplete, note this in the SRA and work to collect or complete the data element for the next SRA.
The following collection methods should be considered and both methods (at least for higher risk scope elements) should be used for the most complete internal data extraction:
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After acquisition, data validation—including documenting the validation—is critical. Many companies have multiple systems, some of which are outdated or not subject to strict data management practices, which can result in data that is incomplete, inaccurate or simply difficult to understand. Checking that the data provided is accurate – and checking that the data is meaningful – is essential to ensure that the data analysis is done correctly. Validation is best achieved through the following scenarios:
The third step is data analysis and risk determination. While quantifying risk through data is an important component of SRA, it is equally important that risk analysis is reviewed by subject matter experts (SMEs). It may be that the qualitative presentation will influence – up or down – the risk determination.
For example, while transaction data may show limited activity involving Russia, controls are in place to verify transactions, and individuals responsible for engaging in activities in Russia and/or reviewing transactions have received training. Therefore, MSP can qualitatively determine:
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MSP, through its qualitative view, can suggest that the residual risk is rated higher than the natural data indicates.
Ultimately, the assessment of each scope element should result in an inherent risk assessment layered with control effectiveness and concluded with residual risk.
The fourth step is stakeholder engagement, communication and future action. Stakeholder engagement through the SRA process is important and provides three key benefits:
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The results of the SRA should then be communicated to senior stakeholders in the company’s business units and the appropriate executives to inform their views on the company’s risks. Companies should use a standard governance framework for such communications, as this should ensure appropriate engagement. It is important that the SRA team should develop actions based on the findings of the SRA. For example, if the SRA has determined that a particular product or service has a high risk, a review must be conducted to determine whether the effectiveness of controls can be improved to reduce the remaining risk. This action note puts the findings of the SRA into practice, increasing the risk position of the company’s sanctions.
OFAC’s framework states that an effective risk-based SCP includes conducting regular periodic SRAs to identify and mitigate potential sanctions risks. Although the frequency depends on the company, the dynamic nature of the sanctions regulations can encourage a more real-time approach. Even in the absence of changes in sanctions regulations, new business opportunities, new or changes in existing products and services, mergers and acquisitions, etc. can lead to new or increased risks of sanctions that must be understood and mitigated in a timely manner. Ultimately, while the frequency of SRA depends on the company’s risk-based decision, the most important thing is to keep SRAs as current as possible.
Finally, the availability of resources should not be the main driver to determine the frequency of SRA. The need to identify and mitigate risk should drive the allocation of resources.
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SRAs are traditionally conducted periodically, typically every 12 to 18 months, depending on the company’s risk profile and regulatory expectations. The following factors should be considered when determining the frequency:
As the company matures, it can begin to implement a continuous SRA approach — where the company’s comprehensive SRA is tactically updated when material events, such as mergers and acquisitions, material remediation / regulatory punishments, and new sanctions requirements impact, prompting reassessment of risk.
This ongoing SRA approach provides the best real-time risk assessment, but tends to require the most resources. Most companies that implement a tactical SRA process update a comprehensive SRA throughout the year. This approach utilizes all ongoing SRA work and, potentially, work products once per periodic cycle.
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Ongoing SRAs require robust data management, automatic generation/reporting systems and responsive SME stakeholder groups for timely qualitative review.
Industry best practices, tips and tricks for implementing SRA evolve over time and require steps to stay current, including the following:
The SRA enables companies to identify and mitigate their sanctions risks, communicate risk issues to stakeholders and implement SCP improvements to better mitigate risks. Companies that fail to implement and keep their SRA up to date expose themselves to regulatory, financial and reputational risks.
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Max Lerner, CAMS, General Manager, Global Sanction Compliance and Anti-Bribery and Corruption Compliance, State Street, MA, USA, MLerner@StateStreet.com The Gramm-Leach-Bliley Act (GLBA) and interagency guidelines to establish information security standards require . financial institutions (banks, savings associations and credit unions) establish an information security risk assessment.
Use version tracking to access data from previous risk assessment versions, compare risk assessment data over time, and determine year-over-year trends.
Calculating the likelihood and potential damage associated with a threat is facilitated by simple control calculation tools. Use the collected information to easily report your risk position.
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Start with recommended guidelines, threats and controls. Then use the boxes to customize each estimate to reflect your organization.
Effortlessly produce consistent and professional documents on the fly to share with your executive team, board of directors, auditors and examiners.
Offers network risk assessment software solutions that help banks and credit unions conduct GLBA-compliant information security risk assessments as well as individual information asset risk assessments. We design our software according to FFIEC, FDIC, OCC, FRB, NCUA and CFPB guidelines. Our web-based risk assessment software is designed
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