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Default risk profile in case of lack of information - FATF recommendations

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by COINS NEWS 109 Views

I have posted this in another sub as well, but writing here as well to hopefully have better discussion.

I am trying to understand what would be the approach in terms of lack of information in setting up the default risk profile of the business relationship. Based on FATF recommendations from 2018 and updated in 2021 for VAs' Risk Based approach, it is clearly said that no business possesses higher risk as such. However, it seems counterintuitive to completely abandon a part of uncertainty modeling, in the sense that in case of lack of information about the user, I should automatically categorize it as low-risk.

As I understand, in the traditional financial system, lack of information or scarce information may lead to higher risk and enhanced due diligence due to the potential repercussions that may occur due to missing some money laundering scenarios.

Also, blockchain is more complicated technologically, which again makes we wonder why specifically in this case lack of information does not necessarily mean enhanced or more cautious approach.

Thanks in advance.

submitted by /u/tsarkashchey
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