Risk assessment is a fundamental process in financial crime compliance that involves identifying, analysing, and evaluating potential risks that could expose an institution to financial crimes such as money laundering, fraud, or terrorist financing. This process is essential for understanding the specific vulnerabilities that a financial institution faces based on its customers, products, services, and geographical areas of operation. 

As part of risk assessment, institutions gather data on these factors, assess the likelihood and impact of various risks, and categorise them as low, medium, or high. This assessment guides the development of tailored controls and measures to mitigate identified risks. Regular risk assessments are crucial for ensuring that compliance programs remain effective and adaptive to new threats, helping institutions avoid regulatory penalties and protect the integrity of the financial system.