Industry Circular 47 of 2024 - BVI FSC and BVI FIA Publish Guidance on Institutional Risk Assessments

BVI FSC and BVI FIA Publish Guidance on 
Institutional Risk Assessments

Tortola, British Virgin Islands; 19 November 2024 - The BVI Financial Services Commission (the FSC) and BVI Financial Investigation Agency (the FIA), announces the publication of their guidance on ‘Institutional Risk Assessments’ (the Guidance), for the benefit of their respective supervised entities.

This Guidance is aimed at assisting Financial Institutions supervised by the FSC and Designated Non-Financial Businesses and Professionals supervised for AML/CFT purposes by the FIA in conducting a proper and effective institutional risk assessment (IRA) through the implementation of a risk-based approach.  It reinforces the provisions within the Anti-Money Laundering Regulations (AMLR) and the Anti-Money Laundering and Terrorist Financing Code of Practice (AMLTFCOP) regarding the conduct of IRAs, as well as the wider provisions for compliance within the Financial Investigation Agency Act (FIAA) and the Financial Services Commission Act (FSCA).

The Guidance explains why entities should carry out an IRA and identifies the types of risk that should be taken into consideration when determining levels of risk exposure.  To facilitate this, a list of risk factors is provided covering risks emanating from:

• products, services and transactions             
• customers
• country/geographic exposure 
• delivery channels 

A non-exhaustive list of data points to be considered during an entity’s data gathering exercise relating to each risk area has been provided, along with relevant questions to consider and some practical examples of higher risk scenarios and typologies.   

The Guidance explains the risk identification process, and considerations for scoring in order to determine an overall risk score.  This includes applying appropriate weightings to identified risk factors within each risk category based on the considered importance of the impact of each factor on the entity’s business. The Guidance also emphasises the need to develop policies and procedures to mitigate the ML, TF and PF risks identified as a result of the IRA, including risks posed by the development of new products, services, business practices, delivery mechanisms and use of new and developing technologies.  These policies and procedures should also include any controls that have been implemented to mitigate against these risks.

Particular events that would trigger the need to update an IRA have been identified to assist entities in their understanding of this requirement.  The Guidance also provides some key takeaways that entities should be mindful of, along with a checklist of helpful questions that should be used as a guide in objectively executing their IRAs. 

The FSC and FIA remain committed to enhancing the Territory’s capability for fighting ML, TF, PF and other financial crimes and will continue to take steps to ensure that relevant tools are made available to supervised entities so that they can do their part in securing compliance.

Managing Director/CEO of the FSC, Mr Kenneth Baker, stated: “While risk is unavoidable, Institutional Risk Assessments have been proven to be effective tools in identifying and mitigating ML, TF, and PF risks.  The FSC encourages its licensees to carry out Institutional Risk Assessments in order to enhance regulatory compliance, institutional effectiveness and legislative conformity, and I hope that our licensees will see it fit to utilise this resource to aid them in proactively assessing their ML, TF and PF risk.”

The Director of the FIA, Mr Errol George, commented, “Risk is not a one-off issue since identifying, evaluating and mitigating it calls for continuous focused and proactive top-down efforts.  The Guidance on Institutional Risk Assessment provides a good springboard for DNFBPs to understand their role in protecting the integrity of both their business operations and our financial system.” 

The Guidance on Institutional Risk Assessments is available on the FSC's website and here on the FIA’s website.

Questions concerning this Press Release may be directed to [email protected] or [email protected].