Financial Regulators or Exchanges give the Financial Crime teams (or CDD/KYC teams) a good understanding of risk management measures when it comes to assessing whether or not an existing or prospective customer (client/supplier/counterparty) is regulated by a recognised institution; often within a “comparable or equivalent” jurisdiction.

The logic from this is that the regulators are meant to supervise, regulate and provide guidance to relevant business sectors. A level of due diligence is performed by the regulators on the service sector corporations and a level of monitoring is also performed to make sure the service sectors comply with regulations and the law. Failure to comply results in penalties, fines, seizures, forfeiture orders and closure.

A good risk assessment methodology takes into consideration the nature, form and degree of reliability we may have on a financial regulatory body. Country risk ratings play a significant role in determining whether or not we (Financial Crime teams/KYC teams etc) can rely on the regulated status of a firm (client/customer/supplier/counterparty etc) through the regulator that supervises or regulates the firms’ affairs.

The list below is created by Kaizen Consultants over the years and it gives an idea of the regions and regulatory bodies that are deemed approved and recognised. Any existing or prospective customer (client/supplier/counterparty) that is regulated by the identified regulatory body below would give a reduced level of risk because of the reliance placed on the principle that the firm in question is being regulated/supervised/monitored by a reliable and trusted regulator in a country that is often considered low risk.