4.1.5. Jurisdiction or Geographic Risk

Effective from 11/11/2021

Under Article 4.1 of the AML-CFT Decision and Paragraph 16.2.3 of the Standards, LEH must identify, assess, understand, and mitigate their jurisdiction or geographic ML/FT risk.

1.	IDENTIFY: LEH should identify the geographic footprint of their operations, which should include:
	•	The jurisdictions in which they have locations, including domestic locations;
	•	The jurisdictions in which their customers are resident or of which they are nationals (for Non-Resident Customers only);
	•	The jurisdictions to which they send remittances to or receive remittances from; and
	•	The jurisdictions to or from which they import or export foreign currency.

LEH need not include every single jurisdiction to or from which they send or receive remittances or with which their customers have ties in the risk assessment, but should at least include the jurisdictions to which they have regular or routine exposure.

2.	ASSESS: The LEH should assign each jurisdiction identified above an inherent risk-rating, based on the degree of ML/FT risk present in that jurisdiction. The LEH is strongly encouraged to develop its own country risk model that takes into consideration any publications issued by the National Anti-Money Laundering and Combating the Financing of Terrorism and financing of Illegal Organizations Committee (NAMLCFTC)⁵, the UAE Financial Intelligence Unit (FIU), the FATF lists of High-Risk Jurisdictions subject to a Call for Action and Jurisdictions under Increased Monitoring,⁶ as well as the Organization for Economic Cooperation and Development (OECD) list of jurisdictions classified as uncooperative tax havens.⁷ The LEH should also consider whether a jurisdiction:
	•	Has been identified by credible sources as providing an environment conducive to funding or supporting terrorist activities or that have designated terrorist organizations operating within them.
	•	Has been identified by credible sources as having significant levels of organized crime, corruption, or other criminal activity, including source or transit countries for illegal drugs, human trafficking and smuggling and illegal gambling.
	•	Is subject to sanctions, embargoes or similar measures issued by international organizations such as the United Nations.
	•	Has been identified by credible sources as having weak governance/law enforcement/regulatory regimes, including countries identified by the FATF as having weak AML/CFT regimes ⁸, for which financial institutions should give special attention to business relationships and transactions.
	Finally, the LEH should take into consideration its own knowledge and experiences, such as the number of Suspicious Transaction Reports (STR) or Suspicious Activity reports (SAR) filed that involve each jurisdiction.
3.	CALCULATE EXPOSURE: The LEH should consider what proportion of its total customer base and transactional activity, by volume and value, is associated with or linked to higher or lower-risk jurisdictions. Based on its documented understanding of the risks, the LEH may decide to weigh its exposure so that a cross-border transaction to a beneficiary in a high-risk jurisdiction has a greater impact than, for example, a domestic transaction between two UAE residents where one party is a citizen of a high-risk jurisdiction. Where a LEH has large exposure to higher-risk jurisdictions, its overall inherent risk will generally be higher.
4.	DOCUMENT: A LEH’s approach to categorizing risk should be clearly documented. The LEH should keep detailed records of its assumptions, statistics used to complete this process, and the resulting analysis and outcomes.

⁵ Available at: https://www.namlcftc.gov.ae/en/high-risk-countries.php
⁶ Available at: https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/?hf=10&b=0&s=desc(fatf_releasedate)
⁷ Available at: http://www.oecd.org/ctp/harmful/theoecdissuesthelistofunco-operativetaxhavens.htm.
⁸ See footnote 12