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Risk Based Approach


risk based approach compliance mechanisms
In its most general definition, the Risk-Based Approach (RBA) is a methodology that allows for prioritising 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 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 the means where the needs are identified.

The Belgian Financial Intelligence Unit has released various sector-based guidance reports for an industry targeted risk-based approach.

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