A risk-based approach means that countries, state authorities, as well as the private sector should have an understanding of the ML/TF risks to which they are exposed and apply AML/CFT measures in a manner and to an extent which would ensure mitigation of these risks. The set of AML/CFT measures formulated by the FATF was required to be based on an understanding of ML/TF risks already in the 2003 Recommendations. With the revised 2012 Recommendation, risk-based approach has become central to the effective implementation of all the requirements set therein. Whereas in the 2003 Recommendations a risk-based approach was supposed to be applied only in certain circumstances, under the new recommendations it is an overarching requirement, which makes the foundation for an effective implementation of all recommendations. 

It is therefore not optional, but a prerequisite for compliance with all other requirements. A risk-based approach therefore consists of the identification, assessment and understanding of risks, as well as the consequent application of AML/CFT measures commensurate to these risks in order to ensure an effective mitigation thereof. The FATF Recommendations require the risk-based approach to be applied on several levels. Firstly, countries should develop a national ML/TF risk assessment in order to understand the full scope of ML/TF risks in the jurisdiction. The outcomes of the national risk assessment should be shared amongst the state authorities, as well as with the private sector.

Secondly, state authorities, in particular supervisory authorities, should take into consideration the national risk assessment, but also understand the particular risks related to their scope of activity. Their actions should be focused accordingly. Focus on key areas increases the efficiency of the use of resources of state authorities and the overall effectiveness of the AML/CFT measures. Finally, the private sector should be aware of the broader risks identified by the state authorities, but should also develop an understanding of the particularities of their business, clients and their products and apply AML/CFT measures in a manner and extent commensurate to such findings.

The FATF issued a number of guidance papers on risk-based approach in order to assist countries to implement the requirements of the FATF Recommendations, but also to help them develop their own guidance for the private sector.

Reference documents

The FATF is currently developing a guidance paper on risk-based approach for money  or value transfer service businesses.

Other documents