A structured penalty risk assessment helps prioritize compliance investments and identify critical gaps. This guide provides a practical framework.
Assessment Framework
Evaluate risk across:
- Likelihood of non-compliance
- Potential penalty severity
- Current control effectiveness
- Gap remediation difficulty
Quantitative Approach
Where possible, assign numerical scores to each risk dimension to enable objective comparison and prioritization.
Risk Identification
Key risk areas:
- User due diligence gaps
- Transaction tracking limitations
- Reporting system capabilities
- Multi-jurisdiction complexity
Exposure Calculation
Estimate potential penalties:
- User count x per-user penalties
- Transaction values x percentage penalties
- Repeat violation multipliers
- Worst-case scenarios
Conservative Estimates
Use conservative assumptions. Penalty calculations often underestimate actual exposure due to aggravating factors discovered during audits.
Control Evaluation
Assess effectiveness of:
- Due diligence procedures
- Data quality controls
- Reporting processes
- Monitoring systems
Action Planning
Prioritize based on:
- Risk severity
- Remediation feasibility
- Resource requirements
- Timeline constraints
Conclusion
Regular risk assessment ensures compliance investments are targeted at highest-impact areas.
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