Glossary > Risk-based approach (RBA)
The definition of a risk-based approach is to identify the highest compliance risk for your organization. It is essential for controlling compliance with organizational requirements, policies, and procedures.
A risk-based approach is prominent in the effective implementation of the FATF recommendations. A risk-based approach means that countries’ competent authorities and banks identify, assess, and understand the risks of money laundering and terrorist financing.
Adopting a risk-based approach (RBA) means that entities or governments understand their level of exposure to money laundering and terrorism financing risks. They will put in place appropriate AML/CFT measures to effectively mitigate these risks.
The FATF standard requires countries to assess and mitigate risks associated with virtual asset financing activities and providers.
A virtual asset service provider (VASP) can adopt an RBA by implementing steps to mitigate the risks inherent to cryptocurrencies. They can, for example, implement KYC processes, appoint a compliance officer, or use transaction monitoring tools.
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