Why DNFBPs Demand a Different Lens for Onboarding and Risk Assessment
Fintelekt Advisory Services and the Asian Bankers Association jointly organised a virtual workshop on 15th May 2025 on Addressing AML Risks in DNFBPs: Insights for Banks and Financial Institutions.
The resource person for the workshop was Ravi Lahoti, a chartered accountant and company secretary by qualification, and a seasoned banker with vast experience leading AML and audit teams at large Indian private sector banks. Arpita Bedekar, Chief Operating Officer, Fintelekt hosted the workshop.
The two-hour workshop focused on enhancing awareness and building practical understanding of AML/CFT risks posed by Designated Non-Financial Businesses and Professions (DNFBPs).
The key takeaway from the workshop was that a generic tick-box approach is no longer enough. Banks and financial institutions need targeted onboarding frameworks, enhanced due diligence, and tailored risk assessments when dealing with DNFBPs.
Understanding DNFPBs and their vulnerabilities:
Various sectors that fall under the umbrella of DNFBPs, such as real estate agents, jewellers, casinos, lawyers, and accountants have different characteristics and it is important to understand their specific vulnerabilities. However, all of these sectors are inherently vulnerable and may often be conduits for money laundering and terrorist financing, due to relatively lower regulation, limited scrutiny and low awareness of ML/TF risks. Many of these sectors have high-value operations that are often cash-intensive.
FATF Recommendations and Scrutiny:
The Financial Action Task Force (FATF) recommendations equally apply to DNFBPs. However, a recent FATF report found that more than half of the 120 jurisdictions reviewed failed to implement obligations for DNFBPs, highlighting significant global compliance gaps.
Obligations and Best Practices for FIs and Banks:
Due to their inherent vulnerabilities as well as significant compliance gaps, banks and financial institutions must treat DNFBPs as a distinct risk category and conduct enhanced due diligence (EDD) for this category of clients. It is important to tag DNFBPs distinctly in core banking and AML transaction monitoring systems, helping the system to pick up the right alerts and red flags for enhanced monitoring and risk categorisation.
Some of the key questions explored during the workshop were:
- Can a bank or financial institution treat DNFBPs like any other high-risk customer?
- What specific policies and parameters should institutions apply when onboarding DNFBPs?
- How do professional enablers exploit client accounts or disguise illicit transactions?
- Why must customer due diligence for DNFBPs include enhanced questions at onboarding and during periodic reviews?
- What is the link between DNFBP-related risks and broader socio-economic factors?
Carrying out customer due diligence and ongoing transaction monitoring for any client by a financial institution is a mandate. But when we have to do it for this particular category of customers, i.e. for DNFBPs, we need to have specific rules, specific policies, and we have to see it with a different prism.
– Ravi Lahoti, Trainer, Fintelekt
The session was well attended, with participants from 10 countries and 15 institutions, including banks, non-banking financial institutions, insurance companies and money changers. All participants received a Fintelekt-ABA Certificate of Completion for attending the virtual workshop.