Risk Based Approach
Since the 2012 FATF Recommendations it is an overarching requirement, which makes the foundation for an effective implementation of all AML /CFT measures recommendations.
What are the benefits of implementing a Risk-Based Approach ?The RBA process allows you to identify potential high risks of money laundering and terrorist financing to focus and develop strategies to mitigate them.
The underlying principle of the RBA is to focus the means (your resources) where they are most needed (your needs) to manage risks within your tolerance level.
- Operational CostsHigh
- Reaction speedSlow
- Human ResourcesHigh
- Operational CostsSmall
- Reaction speedFast
- Human ResourcesLow
Therefore, an RBA consists of identifying, assessing and properly understanding the ML/CFT risks your company is facing as well as the consequent application of AML/CFT measures proportionate to these risks in order to achieve an efficient and effective risk mitigation. The level of identified risk will determine the level of due diligence that is required.
6 Steps for an efficient Risk Based Approach (RBA) procedure
Definition and evaluation of the risks.
Potential money laundering and terrorist financing risks faced by professionals will vary according to many factors including the activities undertaken and the business model.
Analyze the data in the light of the Business Model and prioritize the risks
Act on the identified risks. Escalate the most risky cases
Measure the success, KPI
Update your model and fill the gaps
Keep in mind that the Risk Based Approach implies to set the means where the needs are identified.
For one week, from 13 October to 18 October, representatives of 205 countries and jurisdictions, the IMF, UN, World Bank and other organizations (OECD, OSCE, Europol, Egmont Group of Financial Intelligence Units, ...) are in Paris for the Financial Action Task Force (FA...Read more Author What else ?