Do you like cookies? 🍪 We use cookies, just to track visits to our website, we store no personal details. By using our site, you acknowledge that you have read and understand our Cookie Policy, Privacy Policy, and our Terms of Service.
In its most general definition, the Risk-Based Approach (RBA) is a methodology that allows for the prioritisation of the company's activities based on a previous analysis of data.
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 so 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.
Conventional approach
Prioritisation
No
Operational Costs
High
Reaction speed
Slow
Human Resources
High
Risk Based approach
Prioritisation
Yes
Operational Costs
Small
Reaction speed
Fast
Human Resources
Low
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
1
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.
2
Collect data
3
Analyze the data in the light of the Business Model and prioritize the risks
4
Act on the identified risks. Escalate the most risky cases
5
Measure the success, KPI
6
Update your model and fill the gaps
Keep in mind that the Risk Based Approach implies to set means where the needs are identified.
Central Compliance is the organization of all the compliance monitoring and controlling the professional activities of a given business or company thr...
The digital era has given KYC analysts unprecedented access to a plethora of information on individuals and companies. Newspaper articles, online blogs, and social media are accessible and filterable with one click and may reveal important news on a financial institutio...
