What is the risk-based approach?
The risk-based approach (RBA) is the principle that regulated businesses should identify, assess, and understand their money laundering and terrorist financing risks, then apply proportionate measures to mitigate them. The RBA is the cornerstone of the FATF Recommendations and allows smaller firms to apply controls proportionate to their risk profile.
Applying the RBA in practice
A firm-wide risk assessment forms the foundation. From there, firms should calibrate their CDD intensity, screening frequency, and monitoring depth to the risk level of each customer relationship. Higher-risk customers receive EDD; lower-risk customers may be subject to simplified measures where permitted.
FirmScreen's configurable screening thresholds support the RBA by allowing firms to adjust matching sensitivity based on risk tier.
Related terms