FATF issued guidance on risk-based AML/CFT policies

The Financial Action Task Force has issued finalised supervision on adopting a risk-based strategy for anti-money laundering and counter-terror financing policies.  

The supervision was settled during the Financial Action Task Force recent Plenary, to discuss implementation difficulties linked with transitioning from rules-based guidance to risk-based guidance. 

“Financial Action Task Force urges countries to go beyond a tick-box strategy in observing the corporate sector’s attempts to reduce money laundering and financing of terrorism,” the inter-jurisdictional body says.

The latest supervision is directed at assisting supervisors to discuss the complete spectrum of challenges and direct resources where the challenges are highest, it adds. “A risk-based guidance is less troublesome on lower-risk areas or activities, which is important for controlling or increasing monetary inclusion.”

Supervision consists of three parts:

• Part 1 –  High-level supervision on risk-based guidance, which describes how supervisors should evaluate the challenges their supervised areas encounter and prioritise their actions.
• Part 2 – Useful information and tactics to discuss prevalent problems in risk-based guidance, involving examples of tactics for managing designated non-financial business and professions (DNFBPs) and virtual asset service providers (VASPs). 
• Country representatives from across the global system, of administration of the financial economy, virtual asset service providers, and other corporate sector companies. 

Transitioning from rule-based to risk-based guidance needs “ a shift in supervisory culture”, the Financial Action Task Force states, adding that administrators need to operate beyond government and with the private sector to generate a comprehensive understanding of the difficulties that their regulatory bodies encounter.

Supervisors also require to have relevant strengths, capabilities, and resources as well as federal and organisational support, and to regularly renew their knowledge of risk and modify and enhance their supervisory strategy. 

“The risk-based approach will make supervisors efforts to detect and prevent the financial flows that fuel crime and terrorism more effective. This is crucial because it is better to detect and prevent money laundering and terrorist financing than to prosecute it after a crime has occurred.”