Jurisdiction risk can also refer to when laws unexpectedly change in a jurisdiction an investor has exposure to.
Jurisdiction risk is generally believed to be higher in countries that have either been designated as non-cooperative by the Financial Action Task Force, or have been identified by the U.S. Treasury as requiring special measures due to concerns about money laundering or corruption. Because of the punitive fines and penalties that can be levied against a financial institution that is involved (even inadvertently) in money laundering or financing terrorism, most organizations have specific processes to assess and mitigate jurisdiction risk.
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