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7 Pillars of Inherent Risk

In financial crime and compliance, every effective risk assessment must be anchored in the fundamental exposures a business faces. These are the seven pillars of inherent risk — the foundation upon which all controls, monitoring, and governance should be built.
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Format

Online
Course

Starting date

31 August
2025

Duration

1 Hour

Price

FREE

What you are going to learn

A few more words about this course

This course attempts to explain why risk assessments built without reference to the 7 Pillars of Inherent Risk leave financial institutions dangerously exposed. These pillars are the true foundation of any effective risk-based programme. When firms adopt siloed approaches, they create the perfect environment for illicit actors — who exploit the gaps between fraud, AML, sanctions, and KYC far faster than any individual team can respond.

Regulations, frameworks, and controls should map to the 7 Pillars of Inherent Risk — not the other way around. If you skip them, you risk building compliance programmes that look strong in audits but collapse in the face of real-world threats.


Throughout this course you will discover how to:

  • Understand each of the 7 Pillars — Products & Services, Distribution Channels, Service Channels, Third-Party Exposure, Clients, Geographies, and Industries — and how they directly shape financial crime exposure.
  • Connect regulation to reality by anchoring compliance obligations to inherent risk drivers, ensuring frameworks are practical, defensible, and resilient.
  • Identify the dangers of siloed risk management across AML, fraud, sanctions, and KYC, and learn how criminals exploit these divides.
  • Rebuild risk assessments so they provide a clear, data-driven view of exposure, enabling smarter control design and resource allocation.
  • Leverage technology effectively — exploring how data harmonisation, cross-functional collaboration, and advanced tools can enhance monitoring, reporting, and detection.
  • Apply lessons from enforcement cases where weak risk foundations led to fines, remediation orders, and reputational damage.
  • Future-proof your programme by aligning inherent risk, data quality, and governance with the evolving expectations of regulators and the realities of new financial crime threats.

By the end of the course, you will be equipped with a practical blueprint for risk-based compliance, designed to withstand both supervisory scrutiny and the adaptive tactics of illicit actors.”



Course Outline: The 7 Pillars of Inherent Risk


Module 1 – Introduction to Inherent Risk

  • Defining inherent risk in financial services
  • Why risk assessments fail without a strong foundation
  • Overview of the 7 Pillars and their regulatory relevance
  • How regulators expect risk to be assessed and documented

Module 2 – Industries

  • High-risk sectors (real estate, gambling, luxury goods, extractives, gatekeepers)
  • Why certain industries attract illicit actors
  • Typologies and enforcement case studies
  • Applying controls to mitigate industry-specific risks

Module 3 – Products and Services

  • Risk profiles of cash-intensive vs low-value products
  • High-value securities, remittances, and crypto asset vulnerabilities
  • Product typologies exploited by criminals
  • Aligning product controls with regulatory expectations

Module 4 – Distribution Channels

  • Direct vs indirect distribution models
  • Risks in digital onboarding, intermediaries, and agent networks
  • Real-world cases of channel exploitation
  • Strengthening verification and monitoring by channel

Module 5 – Service Channels

  • Risks from how clients access services (online, mobile, correspondent banking, OTC desks)
  • Transaction velocity, traceability, and monitoring challenges
  • Practical examples of service channel vulnerabilities
  • Adjusting monitoring frameworks to channel exposure

Module 6 – Third-Party Exposure

  • Vendors, introducers, payment processors, affiliates, outsourced partners
  • How weak oversight leads to enforcement actions
  • Best practices for third-party due diligence and monitoring
  • Strengthening contractual and operational safeguards

Module 7 – Clients / Customers

  • Retail vs corporate clients, PEPs, and ownership structures
  • Importance of source of funds and source of wealth verification
  • Identifying high-risk client profiles
  • Tailoring due diligence and monitoring approaches

Module 8 – Geographies

  • Jurisdictional risk factors (sanctions, weak AML/CFT regimes, predicate crimes)
  • FATF high-risk and monitored jurisdictions
  • Case studies of geography-driven enforcement actions
  • Implementing risk-based country assessments and controls

Module 9 – Training Assessment and Certification

  • Knowledge check across all 7 pillars
  • Scenario-based and multiple-choice assessments
  • Feedback on strengths and development areas
  • Certificate of Completion upon successful pass