Geo-financial risk is a term coined by Iain Stewart which relates to the level of geo-political risk in any risk/reward paradigm which investors undertake. This includes exposure to major sanctions and AML programs which may be in force. This is particularly critical as the damage wrought by sanctions and AML-related penalties far outweigh the potential rewards for individuals, entities and governments.

The US, UN and EU have all adopted major sanctions programs which can be highly threatening – with the US sanctions program comfortably the most aggressive. Individuals, entities and entire jurisdictions risk being cut off from US dollar transactions and contact with the US market and those associated with them.

In terms of the scope of sanctions and anti-money laundering efforts globally, the US has incorporated money laundering into its overall sanctions policy playbook, whilst the EU has elected to treat the two areas somewhat separately. The penalties could not be more contrasting – with US penalties a colossal $23.52bn (91% of the global total for AML, KYC, sanctions issues) versus the EU’s mere $1.7bn in fines from 2008-2018.

A proactive, pre-emptive, pragmatic and results-oriented approach to Geo-Financial Risk is therefore essential.