How to Create Dynamic BSA/AML/CFT Risk Assessments

Is your BSA/AML/CFT risk assessment driving action — or collecting dust? Bank Secrecy Act, anti-money laundering, and countering the financing of terrorism (BSA/AML/CFT) program deficiencies consistently rank among the most frequently cited issues in enforcement actions. Regulators have issued seven related actions so far in 2025.

Risk assessment gaps — from static, one-size-fits-all methods to outdated annual reviews — underscore the need for dynamic, institution-specific approaches that evolve in tandem with your business and the changing regulatory landscape. Weak integration, limited alignment with the Financial Crimes Enforcement Network (FinCEN) priorities, and other shortcomings further highlight the need for risk assessments to be living documents that drive both compliance and strategic decision-making — not one-time exercises. 

What makes a risk assessment effective? How can updating it go beyond a compliance requirement to become an operational advantage? Let’s explore the core elements of BSA/AML/CFT risk assessments, when to refresh them, and how to stay exam ready.

Related: How to Leverage Enforcement Actions to Strengthen Your Compliance Program

Core components of BSA/AML/CFT risk assessments

The Federal Financial Institutions Examination Council's (FFIEC) BSA/AML Examination Manual and FinCEN's Customer Due Diligence Requirements set clear expectations for BSA/AML/CFT programs. At the core are four key risk categories: customers, products and services, geographic locations, and delivery channels. FIs must also stay aligned with evolving FinCEN priorities to address emerging threats and regulatory focus areas. FIs that fail to follow these expectations are subject to enforcement actions, as we've already seen this year. 

Customer risk assessment

A BSA/AML/CFT customer risk assessment is the process financial institutions use to evaluate the potential money laundering or terrorist financing risk each customer poses. The goal is to identify higher-risk customers for enhanced due diligence.

Look beyond basic demographics when assessing customer risk, including behavior, business complexity, and ownership structures. Higher-risk indicators include politically exposed persons (PEPs), complex ownership arrangements, cash-intensive businesses, and unusual transactions. Because customer risk evolves, ongoing review is essential as relationships and activities change.

Product and service risk evaluation

Evaluate each product for its vulnerabilities to money laundering and the likelihood of misuse. While private banking, trade finance, and correspondent banking relationships often pose higher risks, even standard products can carry significant risk depending on customer behavior and transaction details. Review how products could be misused and what controls are in place to identify such activity.

Related: Four Banks, Four Failures: Strengthening Internal Controls for Fraud Prevention

Geographic risk analysis

Assess risks tied to customer locations, business operations, and correspondent banking relationships. Review the Financial Action Task Force’s (FATF) list of high-risk jurisdictions, sanctioned countries, and regions identified for significant involvement in criminal activity. Also, evaluate geographic risks, as some areas may have varying risk profiles due to economic factors or patterns in criminal activity.

Delivery channel risk assessment

It is essential to evaluate how products and services are delivered to customers. Channels such as online banking, mobile applications, ATM networks, and third-party partnerships have distinct security considerations that should be reviewed and managed.

How to integrate FinCEN's national AML priorities into risk assessments

FinCEN's national AML priorities should be integrated into risk assessment methodologies. Current priorities focus on corruption, cybercrime, virtual currency, fraud, transnational organized crime, money laundering networks, human trafficking, drug trafficking, and proliferation financing.

To effectively incorporate these areas, FI should consider: 

• Risk factor weighting: Assign risk scores to customers, products, or regions that align with your FI’s risk appetite and other risk management priorities.
• Enhanced monitoring: Establish detection scenarios and monitor key parameters in areas that may pose a risk to your business model.
• Resource allocation: Allocate compliance resources strategically to address high-priority risk areas, adhering to your FI's risk exposure.
• Documentation requirements: A failure to provide sufficient documentation is another common risk assessment violation. Provide evidence of how national priorities informed the conclusions of your risk assessment and the calibration of your compliance program.
  

Related: Want to peek at a BSA/AML CFT risk assessment in action? Check Ncomply for an updated template you can customize based on your FI’s needs.

The power of dynamic risk assessments

Many FIs fall short of regulatory expectations by treating risk assessments as static, once-a-year exercises. One of the most common risk assessment violations cited in 2025 enforcement actions is failure to update risk assessments in response to changing business activities, customer demographics, and regulatory guidance. 

That’s why effective compliance programs go further — viewing risk assessments as a dynamic, ongoing process that adapts to evolving risks, regulatory expectations, and business conditions. 

While annual updates may meet minimum requirements, proactive institutions continually update their risk assessments as needed to stay ahead of emerging threats.

When to update risk assessments

• Quarterly risk reviews are designed to address primary risk indicators, identify emerging trends, and assess significant business or regulatory developments that affect risk profiles.
• Continuous monitoring provides real-time risk indicators that trigger prompt reassessment whenever established thresholds are met.
• Event-triggered updates provide immediate assessment updates when new products launch, markets expand, customer demographics shift significantly, or major regulatory guidance issues arise.
  

Events that signal risk assessment updates

More examples of events that signal a risk assessment update include

• Product and service changes: Introduction of new offerings, especially higher-risk products such as prepaid cards or cross-border payment solutions.
• Market expansion: Entry into new geographic markets or the establishment of correspondent banking relationships.
• Customer or business model shifts: Significant changes in customer profiles or core business models.
• Third-party relationships: Formation of new partnerships, including fintech collaborations or merchant services programs.
• Regulatory developments: Distribution of new guidance, rule changes, or updates to FinCEN priorities.
• Internal risk indicators: Trends in suspicious activity report (SAR) filings, transaction monitoring alerts, or other data revealing emerging risk patterns.
• Examination findings: Regulatory feedback identifying deficiencies or requiring program adjustments.
  

Related: What is Dynamic Risk Management and How Does It Work?

How to create examination-ready risk assessments

To avoid enforcement actions and maintain regulatory compliance, FIs should regularly review and update their BSA/AML/CFT risk assessment programs using risk-based approaches that anticipate emerging threats and adequately identify, measure, and control money laundering and terrorist financing risks.

• Strengthen governance and oversight. Senior management participates in risk assessment processes beyond providing signature approval. Leadership engages in discussions regarding methodology and contributes to decisions about resource allocation based on assessment outcomes.
• Perform comprehensive documentation. Support risk conclusions with clear rationale, data sources, and evidence. Document not just what you found, but why you reached those conclusions and how they influence your compliance program operations.
• Update dynamically. Move beyond annual reviews to continuous risk monitoring with clear triggering events for interim updates. Establish automated indicators that signal when reassessment is necessary.
• Leverage technology to update risk assessments. Use automated software to standardize risk assessments, ensure consistent calculations, and maintain uniform documentation. Structured, repeatable methods can reveal emerging risks that manual processes might overlook.
• Integrate with operations. Your FI’s risk assessment conclusion and operational compliance procedures must be connected to mitigate compliance risk and avoid enforcement penalties. Ensure assessment results directly influence customer due diligence procedures, transaction monitoring parameters, SAR decision-making, training priorities, and resource allocation decisions.
• Conduct regular quality assurance. Effective quality control and audits catch assessment issues early to prevent regulatory violations. Utilize both automated checks and manual reviews for a comprehensive risk evaluation.
  

When compliance becomes a competitive advantage

Dynamic BSA/AML/CFT risk assessments go beyond regulatory requirements — they're strategic tools that enable institutions to optimize resources, strengthen controls, and demonstrate sophisticated risk management to examiners.

As regulations evolve, so must our risk assessments. When we treat them as dynamic tools, we strengthen our BSA/AML/CFT framework, enhance resilience, and turn regulatory change into a strategic advantage.

Take your risk management to the next level. Explore how Nrisk helps you continuously evaluate, measure, and report on risk in real time.