Market Abuse

Environmental risk is the vulnerability of your organisation to external risks such as predicate offences (i.e., deceptive crimes, illicit trafficking, personal crimes or property crimes), money laundering, terrorism financing, sanctions, tax evasion and proliferation financing, as well as internal risks such as governance and oversight, program alignment to risks, program non-compliance and regulatory reporting), resulting from the environment that your business operates in.  The types of Environmental Risks are broken down into External and Internal Operating Environmental Risks:

External Operating Environmental Risks

• Higher Risk Environments - Higher risk environments in the context of tax evasion refers to situations, settings or conditions that are more susceptible to being exploited for tax evasion related activities and typically require enhanced scrutiny and more stringent controls to mitigate the associated risks.
• Nature of Business Activities - Nature of business activities in the context of tax evasion refers to the specific types of operations, transactions, and financial behaviours associated with a particular business or industry. Certain business activities may inherently present higher risks of tax evasion due to their structure, complexity, or the nature of transactions and developing an understanding of the nature of a business's activities helps them to identify, assess, mitigate and manage potential tax evasion related risks.
• Higher Risk Business Relationships - Higher risk business relationships in the context of tax evasion refers to relationships between businesses and certain individual or non-individual customers that are considered to pose a greater risk of being involved in tax evasion or related illicit activities and as a result often require enhanced scrutiny, monitoring, and due diligence to mitigate the associated risks.
• Regulatory Environment - Regulatory environment in the context of tax evasion risk refers to the framework of laws, regulations, guidelines, and enforcement mechanisms established by governments and regulatory authorities to prevent and combat tax evasion. 
• Predicate Offence Risk - Predicate offence risks refer to the underlying criminal activities that generate proceeds that are subsequently laundered and/or used to evade taxes.

Internal Operating Environmental Risks

• Regulatory Compliance Risk -  Regulatory compliance risk refers to the potential for financial loss, legal penalties, or reputational damage resulting from failure to comply with anti-facilitation of tax evasion laws, regulations, and industry standards applicable to a business's operations.
• Governance and Oversight - Governance and oversight risk can occur when a business's Anti-Facilitation of Tax Evasion Program lacks the appropriate levels of Board and Senior Management oversight to ensure it remains effective in managing the identified tax evasion risk.
• Risk and Compliance Culture - Risk and compliance culture risk can occur when leadership is not clear about the importance of the risk and compliance function which often leads to non-adherence to regulatory requirements, increasing the likelihood of compliance failures.
• Business Strategy - The impact of business strategy on regulatory compliance risk is significant and multifaceted since a company’s business strategy determines its goals, target markets, product offerings, operational processes, and overall approach to risk management, all of which influence its regulatory compliance risk profile.
• Anti-Facilitation of Tax Evasion Program Alignment to Tax Evasion Risks - Businesses who do not properly understand the tax evasion risks or who fail to design, implement and maintain appropriate and proportionate controls in its Anti-Facilitation of Tax Evasion Program that address the risks faced resulting from its operating environment, customers, business operations, products and services, delivery channels, transaction activity or geographic exposures could be misaligned resulting in regulatory compliance risk.
• Anti-Facilitation of Tax Evasion Program Non-Compliance - Businesses whose systems, procedures and controls are non-compliant with the relevant laws, rules or regulations, or who are not following the systems, procedures and controls it has documented in its Anti-Facilitation of Tax Evasion Program could result in regulatory compliance risk.
• Regulatory Reporting - Businesses who fail to submit the required regulatory reporting within the required timeframes, such as reporting cash transactions over specified thresholds or reporting inbound and outbound international funds transfers or reporting suspicious activities / matters it has identified or annual Anti-Tax Evasion compliance reports to regulatory authorities could expose themselves to regulatory compliance risks.

Business risk is the risk that your organisation may face increased exposure to tax evasion risks resulting from various business-related factors such as the location of business operations, the nature of business activities the business is engaged in, the risk exposure created by employees and risks associated with third-party outsourced arrangements.

Customer risk is the risk that your customers may be involved in tax evasion or using your products and services to evade taxes. It includes the risks that your customers are located in higher tax evasion risk countries (i.e., tax or secrecy havens) or your customers are engaged in higher tax evasion risk businesses or occupations or your customers are Politically Exposed Persons (PEPs) or the type of legal structure your customers are (i.e., individuals or companies, trusts, partnerships etc).

Product and Services risk is the risk that your organisation may face increased exposure to tax evasion risks resulting from the various products and services that have the potential for certain to be associated with higher levels of tax evasion. This risk can arise from the nature of the products or services themselves, the way they are marketed and sold, and the regulatory environment surrounding them.