The risk-based approach means a focus on outputs. Firms that apply a risk-based approach to anti-money laundering (AML) will focus AML resources where they will have the biggest impact.
Firms must have in place policies and procedures in relation to customer due diligence and monitoring, among others, but neither the law FCA rules prescribe in detail how firms have to do this. Firms’ practices will vary depending on the nature of the money-laundering risks they face and the type of transactions processed.
Firms applying a risk-based approach need to be proactive in seeking out information about money-laundering trends and threats from external sources, such as law enforcement, as well as relying on their own experiences and observations. This allows firms to effectively review and revise their use of AML tools to fit the specific risks that they face.