Risk-Based Approach for the Banking SectorF

The risk-based approach is central to the effective implementation of the FATF Recommendations. A risk-based approach means that countries, competent authorities, and banks identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk.

This flexibility allows for a more efficient use of resources, as banks, countries and competent authorities can decide on the most effective way to mitigate the money laundering / terrorist financing risks they have identified. It enables them to focus their resources and take enhanced measures in situations where the risks are higher, apply simplified measures where the risks are lower and exempt low risk activities. The implementation of the risk-based approach will avoid the consequences of inappropriate de-risking behaviour.

This guidance will help in the design and implementation of this approach for the banking sector, taking into account national risk assessments and the national legal and regulatory framework. It will help develop a common understanding of the risk-based approach between supervisory authorities and banks. The practical examples in this guidance will further assist in understanding the various elements of this approach.  

This guidance consists of three sections:

• Section I explains the key elements of the risk-based approach
• Section II provides specific guidance for banking supervisors
• Section III provides specific guidance for banks

Further reading:

• FATF Recommendations
• FATF Statement, 23 October 2014: ATF clarifies risk-based approach: case-by-case, not wholesale de-risking
• National money laundering and terrorist financing risk assessment
• Risk-based approach guidance for other sectors