Risk-Based Approach for the Banking Sector

This guidance document does not reflect revisions to the FATF standards made after its date of publication, including the 2025 revisions to Recommendation 1 on the risk-based approach. A full list of updates to the Recommendations, by date, is included as Annex II of the FATF Recommendations. This guidance should be read alongside more recent Guidance by the FATF on risk assessment and financial inclusion.

October 2014 - 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:

• The FATF Recommendations
• FATF Statement, 23 October 2014: 'FATF clarifies risk-based approach: case-by-case, not wholesale de-risking'
• National money laundering and terrorist financing risk assessment

Outcomes of the Plenary meeting of the FATF, Paris, 22-24 October 2014