Jurisdiction Risk

A term describing the inherent risk of operating in a foreign jurisdiction, or when an investor is exposed to risk because of unexpected changes in laws affecting the investment. While some risk is always present, it is generally considered to be higher in countries suffering from, or designated as high-risk areas for money-laundering, terrorism financing and corruption. The Financial Action Task Force (FATF) and U.S. Treasury both monitor and maintain lists of such countries. Due to punitive fines and penalties that can be imposed on financial institutions even inadvertently involved in such activities, most organizations have specific processes that assess and mitigate jurisdiction risk.