The EBR is the number one recommendation of the FATF and should form an essential foundation for the effective allocation of resources and the application of risk-based measures in all the recommendations of the body. The recommendation also adds that financial institutions and Designated Non-Financial Activities and Professions (APNDF) should be required to take measures to assess and prevent the risks of money laundering and terrorist financing.

The financial industry has created instruments to assess this risk, such as the self-assessment applied by Enterprise-Wide Risk Assessment (EWRA), the evaluation of products through Product Risk Assessment (PRAM), country and jurisdiction assessments (Basel AML Index), among other.

Despite these efforts, the industry has structural flaws that compromise the entire regime and we can attribute it to two crucial aspects: inconsistency in the conceptualization of risk and flaws in governance.

Current regulation continues to be anchored to a one-dimensional conception of risk, based on Knowledge of the Client (KYC) as the cornerstone to understand and manage it. A new proposal consists of understanding risk from a holistic perspective, to evolve towards Knowledge of Risk (KYR).

The KYR considers demographic and quantitative dimensions of risk, and we can measure it from its most intuitive element: the transaction. Measuring the risk of each transaction based on the weighted interaction of the elements that comprise it would provide the reaction and adaptability capabilities required by the new digital economy environment. This is possible since each entity captures a set of data that forms the chain of the transaction, in which we find the identity information of the client, the product or service, its origin and destination, the shipping channels, the amount, the currency, the counterpart, among others.

With these possibilities, it is ridiculous to learn that, in various latitudes of the planet, large banks are called to appear in court because they failed in the due diligence of a client, failed to send reports of suspicious activity or feigned blindness while they spent millions of dollars of illicit origin for his books. These scandals are only understood as governance failures within the industry.

The United Nations Conference on Trade and Development, in its Report on the Digital Economy 2019, notes that “data is fundamental to all fast-growing digital technologies, such as data analytics, artificial intelligence, blockchains, the internet of things, cloud computing and all Internet-based services ”.

Indeed, digital technologies allow us to build transactional risk assessments and models based on artificial intelligence algorithms trained with big data, that we can now process with the power of cloud computing. The economies of scale of this type of computing make its use plausible by small economic units that previously could not afford robust technological infrastructures.