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The risk-based approach (RBA) is a core concept of the Fourth Money Laundering Directive—4MLD, and therefore of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692.
The general concept of an RBA is simple: you cannot monitor everything done by each member of staff for every client all the time. You should therefore identify where your greatest risks lie and apply your resources appropriately.
You should not confuse your organisation-wide risk assessment with the RBA.
If the MLR 2017 apply to your organisation, you must take appropriate steps to identify and assess your organisation’s money laundering and terrorist financing risks, ie conduct an organisation-wide risk assessment.
The organisation-wide risk assessment is intended to inform your anti-money laundering (AML) and counter-terrorist financing (CTF) measures. It will enable you to take a considered RBA to devising and implementing your systems and controls where such an approach is permitted or required by the MLR 2017.
The starting point of the RBA is that greater risks should command greater resources.
Generally an RBA will involve:
identifying the risks you face
assessing the risks you face
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