Risk-Based Approach in Financial Crime Mitigation

Download our FCM cookbook to create your ideal recipe based on your risk appetite.

A risk-based approach to financial crime mitigation is essential for financial institutions implementing sound AML practices.

But how have recent industry standards and regulatory updates impacted emerging risks and new asset classes? And what factors should you consider when implementing a risk-based approach to reflect your business and risk appetite?

In this cookbook, we set out the history behind the risk-based approach, recent regulatory updates, and offer our own methodology to implement a best-fit approach for your institution, with considerations such as customer, product, and services, as well as counterparties and metrics derived from FCM services offered.

Key Takeaways

FATF guidance became the blueprint for regulations in many jurisdictions – expanding standards and recommendations to virtual assets and virtual asset service providers
EU announced to overhaul of existing AML and CFT rules which are expected to have a significant impact on the risk-based approach
Traditional Finance meets Decentralized Finance – changing the risk landscape and the risk-based approach for traditional FIs. Understanding the nature of each other’s businesses is key to managing emerging risks.
Despite all AML efforts, risk assessments, and risk mitigation measures, detecting and stopping money launderers remain constant challenges for passionate financial crime fighters.
Establishing and maintaining consistent and constructive communication with regulators helps to understand expectations, to navigate through a country’s regulatory landscape, and to participate in shaping future regulations.

Less is more in the risk-based approach – a well-documented risk-based approach, understood by all employees and implanted in a compliance culture.