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The FATF, through its 40+9 Recommendations (2003) has recognized the principle of a risk-based approach (RBA) to combating money laundering / terrorist financing (ML/TF).
In the past few years, the FATF has extensively discussed the issue of the risk-based approach (RBA) with the private sector. The FATF Recommendations contain language that permits countries to some degree to adopt a risk-based approach to combating money laundering and terrorist financing. That language also allows countries to permit financial professions and designated non-financial businesses and professions to use a risk-based approach in applying certain of their AML and CFT obligations. To deal with this issue and develop further guidance for public authorities and for the industry, the FATF created several electronic advisory groups on the risk-based approach as tools to facilitate dialogue among the interested parties. The first electronic advisory group was set up in March 2006 and included both public and private sector participants.
Since June 2007, in order to assist both public authorities and the private sector in applying a risk-based approach, the FATF has adopted a series of guidance in co-operation with the following sectors:
These guidance papers are intended to assist both public authorities and the private sector in applying a risk-based approach to combating money laundering and terrorist financing by:
- Supporting the development of a common understanding of what the risk-based approach involves.
- Outlining the high-level principles involved in applying the risk-based approach.
- Indicating good practice in the design and implementation of an effective risk-based approach.
The guidance aims to set out the key elements of an effective risk-based approach and identifies the types of issues that both public authorities and financial institutions may wish to consider when applying a risk-based approach.
The guidance recognises that each country and its national authorities, in partnership with its financial institutions, will need to identify the most appropriate regime, tailored to address individual country risks.
Therefore, the guidance does not attempt to provide a single model for the risk-based approach, but seeks to provide guidance for a broad framework based on high level principles and procedures that countries and individual firms may wish to consider when applying a risk-based approach to ML and TF.
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