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AML Business-Wide Risk Assessment Template (ML/TF/PF)

Enterprise-wide ML/TF/PF and sanctions evasion risk assessment: method, inputs, inherent risk by area, control ratings, residual risk, appetite, actions

ISO & ComplianceFullDirective (EU) 2015/849 Art. 8; AMLR (EU) 2024/1624 Art. 10 from 2027-07-10; 31 CFR 1020.210; UK MLR 2017 reg. 18; FATF R.1amlbusinessriskassessmentmath

How to use: Use it when the MLRO prepares the annual enterprise-wide ML/TF/PF risk assessment for board approval. Fix the scales and formulas in the methodology section first, then quantify the business profile so every likelihood score rests on data. The main pitfall is rating every area medium year after year with no link to controls, resources or actions.

Preview

AML Business-Wide Risk Assessment: [Institution name] [Assessment year]

The documented enterprise-wide (business-wide) assessment of the money laundering (ML), terrorist financing (TF) and proliferation financing (PF) risks an institution faces, including the risk of non-implementation or evasion of targeted financial sanctions: methodology, inputs, inherent risk by customer, product, channel and geography, control effectiveness, residual risk against appetite, and the action plan. Based on public law as of 2026-10: the risk assessment duty under national law transposing Directive (EU) 2015/849 (Art. 8), Regulation (EU) 2024/1624 (AMLR) Art. 10 from 2027-07-10, the US Bank Secrecy Act programme rule (31 CFR 1020.210) with the FinCEN programme proposal of 2026-04-07 (a proposal, not law), and UK MLR 2017 regulation 18. FATF Recommendation 1 is cited by number and title only. Replace every [bracketed] value and every row marked Example. This is a document format, not legal, regulatory or financial advice. Obtain the law or standard for the normative text and check local law.

Document control

FieldValue
Document ID[BWRA-2026]
Institution[Legal name, LEI] (Example: Fernhollow Bank)
Scope[Group, entities and branches, see section 1.2]
Assessment period[YYYY-MM-DD to YYYY-MM-DD] (Example: 2025-10-01 to 2026-09-30)
Data cut-off dateYYYY-MM-DD (Example: 2026-09-30)
Version[1.0]
Status[Draft / Approved / Superseded]
Owner[@mlro]
Approvers/reviewers[@compliance-manager], [@management-body], [@cro] (challenge), [@head-of-internal-audit] (review)
Last updatedYYYY-MM-DD
Next scheduled updateYYYY-MM-DD (at least annually, see section 13)
ClassificationConfidential; available to supervisors on request
Policy referenceAML/CFT Programme Policy (compliance/aml-cft-programme-policy), section 4

Approvals

RoleNameDecisionDate
MLRO / compliance officer (author)[@name][Submit]YYYY-MM-DD
Chief risk officer (second-line challenge)[@name][Challenge recorded]YYYY-MM-DD
Compliance manager[@name][Endorse]YYYY-MM-DD
Management body[Minute reference][Approve]YYYY-MM-DD

Revision history

VersionDateAuthorChange
0.1YYYY-MM-DD[@mlro]Data collection and draft scores
0.9YYYY-MM-DD[@mlro]Second-line challenge incorporated
1.0 (Example)2026-10-25[@mlro]Approved; PF and sanctions evasion assessed as separate areas

Contents

1. Purpose, scope and legal basis

1.1 Purpose

This assessment identifies and evaluates the ML, TF and PF risks to which [Institution name] is exposed, and the risk that targeted financial sanctions are not implemented or are evaded through its services. It sets the residual risk for each risk area, compares it with the appetite set by the management body, and decides which controls, resources and monitoring changes are needed. It is the basis for the customer risk rating methodology, the transaction monitoring coverage plan, the sanctions screening scope, the training plan and the independent testing plan.

1.2 Scope

Entity / unitIncludedBusiness linesCustomers at cut-offNotes
Fernhollow Bank (parent) (Example)YesRetail, SME and commercial, CRE, trade finance, EUR correspondent accounts (respondents counted at the New York branch)377,200Two EU Member States
Fernhollow Leasing (Example)YesEquipment and vehicle leasing18,300Shares some customers with the parent
Fernhollow Payments (Example)YesMerchant acquiring, payment accounts16,200Licensed payment institution
Fernhollow Bank, New York branch (Example)YesUSD correspondent clearing, trade finance300US addendum applies
Total (Example)412,000Each customer counted once, in the entity that onboarded it; the 300 respondents were onboarded through the New York branch file and also hold EUR accounts at head office

1.3 Legal basis (as of 2026-10, check local law)

JurisdictionRequirementKey points for this assessment
FATFR.1 Assessing risks and applying a risk-based approachIdentify, assess and understand ML, TF and PF risks; apply measures proportionate to risk
EU nowNational law transposing Directive (EU) 2015/849 Art. 8Documented, kept up to date, proportionate; consider the EU supranational and national risk assessments
EU from 2027-07-10AMLR Art. 10Covers ML, TF and non-implementation and evasion of targeted financial sanctions; considers Annex I risk variables and Annexes II and III risk factors, Union, national and sectoral assessments; assessment before new products, services, channels and technologies; drafted by the compliance officer, approved by the management body; AMLA guidelines on minimum content under Art. 10(4)
US (branch)31 CFR 1020.210 (programme), FFIEC BSA/AML Examination Manual (risk assessment section)Risk assessment underpins the programme; the 2026-04-07 FinCEN proposal would make a risk assessment process explicit and require the national AML/CFT priorities to be considered (proposal only)
UK (if applicable)MLR 2017 reg. 18Written risk assessment considering customers, countries, products, transactions and delivery channels

2. Methodology

The assessment follows four steps for each risk area: (1) score inherent risk from likelihood and impact before controls; (2) rate the effectiveness of the controls that mitigate the area; (3) compute residual risk; (4) compare residual risk with appetite and decide on actions. Assessors may adjust a computed score by one band with written justification, approved by the MLRO and recorded in the adjustment log in section 11.

2.1 Inherent risk

Likelihood (L) measures how probable it is that the area is used for ML, TF, PF or sanctions evasion, based on volumes, customer mix, typologies and past cases. Impact (I) measures the consequence: size of possible flows, legal and regulatory consequences, and harm to the financial system.

ScoreLikelihoodImpact
1Remote: no relevant typologies, low volumes, no cases in 3 yearsMinor: small flows, no regulatory consequence
2Possible: typologies exist; isolated internal casesModerate: limited flows; supervisory finding possible
3Likely: established typologies; recurring cases or alertsMajor: significant flows; formal supervisory action possible
4Almost certain: active abuse observed in the sector or the institutionSevere: large flows; enforcement, licence or correspondent relationships at risk
Inherent score=L×I(1 to 16)\text{Inherent score} = L \times I \quad (1 \text{ to } 16)

2.2 Control effectiveness

Each control domain relevant to an area is rated for design and operating effectiveness using testing evidence (quality assurance, independent testing, audit findings, supervisory findings). The weakest material domain sets the area's control rating unless the assessor documents why stronger compensating controls apply.

Control ratingMeaningMitigation factor cc
StrongWell designed, tested, no material findings0.50
AdequateWell designed; minor findings being fixed0.30
Needs improvementDesign or operating gaps with open medium or high findings0.15
WeakMaterial gaps; control cannot be relied on0.00

2.3 Residual risk and bands

Residual score=Inherent score×(1−c)\text{Residual score} = \text{Inherent score} \times (1 - c)
BandScore range (inherent and residual)Appetite position (Example)
Lowbelow 5.0Within appetite
Medium5.0 to below 9.0Within appetite; monitor
High9.0 to below 13.0Outside appetite; action plan within 12 months, board visibility
Very high13.0 and aboveOutside tolerance; immediate action, consider restricting the activity

Data quality matters as much as the scales. For each likelihood score, record the data extract, its owner and the date it was produced, and note any known gaps (for example customers with missing nationality or industry codes). Where data are missing, assume the higher of the plausible scores rather than the lower, and log the gap as an action. Two assessors from the second line score each area independently; differences of more than one point are discussed and the reason for the final score is recorded. This makes the result repeatable and gives the supervisor evidence that judgement was applied consistently.

The overall residual risk is the simple average of the area residual scores, mapped to the same bands. Any area in the High or Very high band is reported to the management body individually, whatever the overall result.

3. Inputs and information sources

The assessment draws on external sources (what the authorities and standard setters say about risk) and internal sources (what the institution's own data and cases show). Where the two disagree, the assessor explains why, because a gap often reveals a control weakness or a blind spot in monitoring.

IDSourceDate or versionUsed for
SRC-01EU supranational risk assessment (Commission)[Latest edition]Sector and product typologies
SRC-02National risk assessment of [Member State][Edition and date]National threats, priority predicate offences
SRC-03List of high-risk third countries identified by the European Commission[Delegated regulation, latest amendment]Geography scores
SRC-04FATF public statements and jurisdictions under increased monitoring[Latest plenary]Geography scores
SRC-05US national AML/CFT priorities (FinCEN, 2021-06-30)2021 list (current as of 2026-10)US branch areas
SRC-06Supervisory communications and inspection findings[Dates]Control ratings
SRC-07Internal data: customer base, product volumes, cross-border flowsCut-off 2026-09-30 (Example)Likelihood scores
SRC-08Internal cases: alerts, investigations, SARs, exits, law-enforcement requests12 months to cut-off (Example)Likelihood scores
SRC-09Quality assurance, independent testing and audit results[Report IDs]Control ratings
SRC-10Customer risk rating distributionCut-off (Example)Customer area

4. Business profile

The profile below summarises the size and shape of the business at the cut-off date. All figures are fictional and illustrative.

IndicatorValue at 2026-09-30 (Example)Change vs prior year
Total assetsEUR 47,400 million (latest balance sheet, 2026-12-31 plan figure)[+x%]
Customers: retail individuals400,000[+x%]
Customers: SME and commercial11,200[+x%]
Customers: financial institutions (respondents)300[x]
Customers: non-profit organisations, trusts and other500[x]
Customers: corporate subtotal (all non-retail)12,000[x]
Customers: total412,000[+x%]
Customers rated High under the methodology10,000 (2.4%)[x]
Cross-border payments, 12 months (same total as the Sanctions Exposure Assessment)EUR 38,000 million[+x%]
of which to or from higher-risk jurisdictionsEUR 1,150 million (3.0%)[x]
Trade finance transactions, 12 months6,800[x]
Internal unusual activity reports / external SARs filed2,140 / 610[x]

Check the totals: 400,000 + 11,200 + 300 + 500 = 412,000 customers (400,000 retail and 12,000 corporate). High-risk share: 10,000 / 412,000 = 2.4%. Higher-risk jurisdiction share of payments: 1,150 / 38,000 = 3.0%.

5. Customer risk

Customer risk depends on the share of customers whose profile makes abuse more likely or more damaging: legal entities with complex or opaque ownership, non-resident customers, PEPs and their family members and close associates, cash-intensive businesses, and sectors named in the national risk assessment. At Fernhollow Bank the retail base is large and mostly low risk, but a small segment of non-resident customers and complex corporate structures generates a disproportionate share of alerts and SARs.

Sub-factorData at cut-off (Example)Observation
Complex ownership (three or more layers, or trusts in the chain)1,300 legal entity customers (11% of 11,700 legal entities)Concentrated in SME commercial real estate holding structures
Non-resident customers6,40041% of external SARs relate to this group
PEPs, family members and close associates520All rated High under trigger TRG-01 of the methodology, domestic and foreign alike; 7 are foreign PEPs
Cash-intensive businesses900 legal entitiesRetail, hospitality, vehicle trade
Customers linked to sectors named in the national risk assessment1,500 legal entitiesReal estate, construction, vehicle trade
AreaDescriptionLIInherentInherent band
RA-01 (Example)Customers: non-resident and complex legal entity customers3412High

6. Products, services and transactions

Products differ in how easily they can move value quickly, across borders, through third parties or with limited transparency. Trade finance and correspondent services expose the bank to trade-based money laundering, mis-description of goods and nested relationships. Merchant acquiring in the payments subsidiary exposes it to transaction laundering, where an onboarded merchant processes payments for undisclosed businesses. Leasing is lower risk because assets are identified, payments are scheduled and funds come from the customer's own account, although early repayment in cash or from third parties remains a red flag.

AreaDescriptionKey featuresLIInherentInherent band
RA-02 (Example)Trade finance and correspondent payments (parent)Cross-border, document-based, third-party flows, nested respondents3412High
RA-05 (Example)Merchant acquiring and payment accounts (payments subsidiary)High volume, card-not-present, transaction laundering typologies4312High
RA-06 (Example)Equipment and vehicle leasing (leasing subsidiary)Identified assets, scheduled payments, limited cash224Low

New products assessed during the period are recorded here with the date of the product approval risk assessment, as required before launch under AMLR Art. 10 from 2027-07-10 and under current national law.

Product approval IDProductAssessment dateResultMLRO sign-off
NPA-2026-04 (Example)Instant SEPA payments for SME customers2026-03-12Medium; added velocity scenario before launch[@mlro]

7. Delivery channels

Delivery channels affect how reliably the institution knows who it is dealing with. Remote onboarding through the mobile app now accounts for most new retail customers. Identity is verified with electronic identification or document and liveness checks, which reduces impersonation risk, but the channel is targeted by money mule recruitment and by synthetic identities. Business introduced through intermediaries is small and subject to contractual oversight.

Sub-factorData at cut-off (Example)Observation
Share of new retail customers onboarded remotely78%Mule account cases concentrated in accounts under 6 months old
Customers onboarded through intermediaries1,200Annual intermediary reviews completed
Reliance on third-party CDDNoneNot used
AreaDescriptionLIInherentInherent band
RA-03 (Example)Remote onboarding through the mobile app339High

8. Geography

Geographic risk comes from the countries where customers reside, where beneficial owners are based, and where payments are sent to or received from. Fernhollow Bank's own operations are in two EU Member States with comparable AML/CFT frameworks. The exposure arises mainly from cross-border flows of SME customers trading with suppliers in jurisdictions with strategic deficiencies, and from the US branch, which clears US-dollar payments for respondent banks in several regions.

AreaDescriptionLIInherentInherent band
RA-04 (Example)Cross-border flows to and from higher-risk jurisdictions (EUR 1,150 million, 3.0% of cross-border payments)3412High
RA-09 (Example)US branch: USD correspondent clearing for respondent banks3412High

9. Terrorist financing, proliferation financing and sanctions evasion

Terrorist financing often involves small amounts from legitimate sources, moved through non-profit organisations, money transfer services or personal accounts. Proliferation financing and sanctions evasion typically use front companies, trade in dual-use goods, transshipment through third countries and complex ownership to hide a designated person's control. These risks are assessed as separate areas so that their controls (screening, trade document review, ownership and control analysis) are rated on their own evidence. The restrictive measures exposure assessment expected under EBA/GL/2024/14 is summarised here and documented in detail in the Sanctions Exposure Assessment (compliance/sanctions-exposure-assessment).

AreaDescriptionLIInherentInherent band
RA-07 (Example)Terrorist financing: non-profit organisation customers and small-value transfers to conflict-adjacent regions248Medium
RA-08 (Example)Proliferation financing and targeted financial sanctions evasion: trade customers dealing in dual-use goods248Medium

10. Control effectiveness

Control ratings rest on evidence gathered during the period: quality assurance results, the independent test, internal audit findings and supervisory findings. A control domain with an open high-rated finding cannot be rated better than Needs improvement.

Control domainEvidence (Example)Rating
CTL-01 Governance and risk assessmentAnnual MLRO report; no open findingsStrong
CTL-02 CDD and EDDQA pass rate 93%; 2 medium findings on beneficial ownership verificationAdequate
CTL-03a Transaction monitoring: payment and customer scenariosAbove- and below-the-line tuning tested in 2026; no open findingsAdequate
CTL-03b Transaction monitoring: trade finance document checksCoverage gap for trade finance document checks (audit finding IA-2026-07, high)Needs improvement
CTL-04 Merchant monitoring (payments subsidiary)No transaction laundering detection; finding PAY-2026-02 (high)Needs improvement
CTL-05 Sanctions screeningTuning tested; dual-use goods review manual and inconsistentNeeds improvement for trade; Adequate for payments
CTL-06 Remote onboarding controlsLiveness and device checks; mule detection rule live since 2026-05Adequate
CTL-07 US branch programmeIndependent test 2026: no material findings; OFAC screening testedStrong
CTL-08 TrainingCompletion 98.6%Adequate
AreaRelevant control domainsArea control ratingcc
RA-01CTL-02, CTL-03aAdequate (both domains Adequate)0.30
RA-02CTL-03b, CTL-05 (trade)Needs improvement0.15
RA-03CTL-06, CTL-02Adequate0.30
RA-04CTL-03a, CTL-05 (payments)Adequate (both domains Adequate)0.30
RA-05CTL-04Needs improvement0.15
RA-06CTL-02Adequate0.30
RA-07CTL-02, CTL-05 (payments)Adequate0.30
RA-08CTL-05 (trade)Needs improvement0.15
RA-09CTL-07Strong0.50

Each area takes the rating of its weakest material control domain, as section 2.2 requires. No compensating-control exception is used in this assessment, so no area is rated better than its weakest domain: RA-01 and RA-04 rely on the payment and customer monitoring scenarios (CTL-03a, Adequate), while the trade finance document gap (CTL-03b, Needs improvement) is carried by RA-02 only. Splitting a domain in this way is acceptable only when the evidence (here, audit finding IA-2026-07) shows that the weakness is confined to one part of it; record that reasoning in the working papers.

11. Residual risk and appetite

AreaInherentccResidualResidual bandAppetite position
RA-01 Customers (Example)120.308.4MediumWithin appetite
RA-02 Trade finance and correspondent (Example)120.1510.2HighOutside appetite
RA-03 Remote onboarding (Example)90.306.3MediumWithin appetite
RA-04 Higher-risk geographies (Example)120.308.4MediumWithin appetite
RA-05 Merchant acquiring (Example)120.1510.2HighOutside appetite
RA-06 Leasing (Example)40.302.8LowWithin appetite
RA-07 Terrorist financing (Example)80.305.6MediumWithin appetite
RA-08 PF and sanctions evasion (Example)80.156.8MediumWithin appetite
RA-09 US branch USD clearing (Example)120.506.0MediumWithin appetite
Overall (average) (Example)7.19MediumWithin appetite, with two areas outside

Check the computation: residual scores sum to 8.4 + 10.2 + 6.3 + 8.4 + 10.2 + 2.8 + 5.6 + 6.8 + 6.0 = 64.7; divided by 9 areas gives 7.19, which falls in the Medium band. RA-02 and RA-05 are High (10.2 each) and are reported individually to the management body with the actions in section 12.

Adjustment IDAreaComputed bandAdjusted bandJustificationApproved by
ADJ-01 (Example)RA-08MediumMedium (no change)Considered raising to High given sector alerts; retained Medium because exposure is limited to 140 customers, all reviewed manually in Q3[@mlro]

Read the result in two ways. The overall Medium rating tells the management body that the programme as a whole is proportionate to the business. The two High areas tell it where that conclusion does not hold: trade finance and correspondent payments in the parent, and merchant acquiring in the payments subsidiary. Both share the same cause, a monitoring control that was designed for plain payment flows and does not look at the commercial substance behind a document or a merchant. The action plan therefore targets the control gap rather than the customers, and the MLRO does not propose restricting either activity while the actions are on track. If either action slips by more than one quarter, the MLRO will propose interim limits, such as a cap on new trade finance customers in higher-risk corridors.

The chart places each area by its inherent likelihood and impact scores; colour and position do not replace the residual table, which is the authoritative result.

12. Action plan

Action IDArea / controlActionOwnerDueSuccess measureStatus
ACT-01 (Example)RA-02 / CTL-03bImplement trade document checks (price, goods, vessel and route) in trade finance workflow and add two trade-based ML scenariosHead of trade operations2027-03-31Audit finding IA-2026-07 closed; scenarios validatedOpen
ACT-02 (Example)RA-05 / CTL-04Deploy merchant website and transaction pattern monitoring for transaction launderingPayments subsidiary MLRO2027-06-30Finding PAY-2026-02 closed; monthly detection reportOpen
ACT-03 (Example)RA-08 / CTL-05Standardise dual-use goods review with checklist and second review for high-risk shipmentsHead of sanctions2027-01-31QA pass rate at least 95% on sample of 50Open
ACT-04 (Example)RA-03 / CTL-06Extend mule detection to accounts older than 6 monthsHead of fraud and FCC analytics2027-02-28Rule validated; alert productivity trackedOpen
ACT-05 (Example)MethodologyAlign minimum content with AMLA guidelines under AMLR Art. 10(4) once publishedGroup MLRO2027-05-31Gap analysis approvedPlanned

Actions are tracked monthly by the MLRO and reported quarterly to the management body together with the AML/CFT Programme Policy (compliance/aml-cft-programme-policy) indicators. Changes to customer scoring that follow from this assessment are made in the Customer Risk Rating Methodology (compliance/customer-risk-rating-methodology); changes to monitoring follow the Transaction Monitoring Scenario Specification (compliance/transaction-monitoring-scenario-spec).

13. Approval, update triggers and record keeping

The management body approves the assessment annually. The MLRO updates the relevant area, and seeks approval of the change, within [60] days of any of the following triggers:

  • A new product, service, delivery channel, technology or customer segment, or entry into a new country.
  • Publication of a new supranational or national risk assessment, or a change to the Commission list of high-risk third countries or FATF statements that affects a material flow.
  • A significant supervisory or internal audit finding, or a material incident such as a large sanctions breach or a major SAR case.
  • A merger, acquisition or material outsourcing.
  • New sanctions regimes or designations that materially change exposure.

When the assessment is presented for approval, the MLRO summarises in one page what changed since the previous version, which scores moved and why, which actions closed, and which new actions are proposed. The management body records its challenge and any changes it requests in the minutes. A board that approves the assessment without questions is a warning sign for supervisors, so the minutes should show the discussion.

All versions, working papers, data extracts and approvals are kept for at least five years after the version is superseded, and are made available to supervisors on request. The assessment, its data and its working papers are confidential and shared on a need-to-know basis.

14. Glossary and references

TermMeaning
BWRABusiness-wide (enterprise-wide) risk assessment
Inherent riskRisk before controls
Residual riskRisk remaining after controls
Mitigation factor (cc)Share of inherent risk the controls are assumed to remove, from the control rating
PFProliferation financing
TFSTargeted financial sanctions
Transaction launderingProcessing card payments for an undisclosed business through an onboarded merchant

References (obtain the current official versions):

  • FATF Recommendations, R.1 Assessing risks and applying a risk-based approach, R.6 and R.7 targeted financial sanctions (number and title only).
  • Directive (EU) 2015/849, Art. 8, as amended, and national transposition; EUR-Lex.
  • Regulation (EU) 2024/1624 (AMLR), Arts 9, 10 and 90, Annexes I to III; applies from 2027-07-10; EUR-Lex.
  • EBA Guidelines on ML/TF risk factors (EBA/GL/2021/02, as amended); EBA/GL/2024/14 on restrictive measures (applies 2025-12-30).
  • 31 CFR 1020.210; FFIEC BSA/AML Examination Manual; FinCEN AML/CFT National Priorities (2021-06-30); FinCEN NPRM 2026-04-07 (proposal).
  • UK MLR 2017 (SI 2017/692) reg. 18.
  • Related templates: Risk Methodology (compliance/risk-methodology), Risk Register (compliance/risk-register), Risk Appetite Statement (finance/risk-appetite-statement), Fraud Risk Assessment (compliance/fraud-risk-assessment), Board Pack (business/board-pack).

Standard and licence note

Based on public law: EU legislation from EUR-Lex (Directive (EU) 2015/849 and Regulation (EU) 2024/1624), reused with acknowledgement and summarised in original wording; US federal regulations and FinCEN and FFIEC publications (US government works, public domain); and the UK Money Laundering Regulations 2017 (Crown copyright, Open Government Licence v3.0 where stated). EBA guidelines are cited by number with acknowledgement. FATF and AMLA publications are cited by number and title only; no text is reproduced or paraphrased. The scoring scales, formulas and bands are original and illustrative, not regulatory requirements. The FinCEN 2026 rule is a proposal. Fernhollow Bank and all figures are fictional. This template is original text written for this collection. Check the current official version of each law and guideline before use. Template licence: MIT.

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