Why take a risk-based approach?
The Risk-Based Approach is a cornerstone in fulfilling Anti-Money Laundering (AML) compliance requirements as per the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act 1992 and the sector-specific regulatory authorities such as the Monetary Authority of Singapore as per the revised FATF International Standards on Combating Money Laundering, Terrorism Financing and Proliferation Financing (ML/TF/PF).
Apart from being a regulatory requirement, the Risk-Based Approach in AML compliance is widely accepted as it:
- Allows regulated entities to utilise their resources optimally and achieve greater efficiency
- Leads to smooth and prompt onboarding and continued business relationships with low-risk customers
- Provides flexibility to regulated entities in adapting their risk management to the evolving risk factors
- Follows a systematic approach in risk assessment taking factors such as customer base, geographic location, product/service type, etc, into consideration.
Refer to this descriptive illustration to explore other benefits of adopting a Risk-Based Approach