On 4 March 2021 the Financial Action Task Force (FATF) released new guidance aimed at supporting the application of a risk-based approach to anti-money laundering (AML) and counter terrorist financing (CTF) supervision. This builds on previous guidance released in 2015, but widens the scope of the guidance to enhance applicability to more recently AML regulated types of firm (such as real estate agents and the art market) as well taking into account areas of the global economy which in 2021 are considered to be higher risk (such as virtual asset service providers (VASPs)).
The new FATF guidance in particular highlights that transitioning from rules-based to risk-based supervision requires not only changes in process but also changes in culture. It also explicitly calls out that the supervisory approach adopted must cater for the multi-faceted nature of the AML regulated sector, whereby every business operates differently and faces different risks.
To address these points, the FATF guidance is split into three discrete parts:
- General overarching guidance with respect to the application of risk-based supervision in line with FATF Standards.
- Case studies of common challenges to bring to life potential resolutions for thematic risk-based supervision challenges. This section also discusses adaptations of the risk-based supervisory approach for non-traditional financial services firms, such as VASPs.
- Specific country examples of instances of successful implementations of a risk-based supervisory approach.
The FATF expect that this guidance will enhance the effectiveness of the role of supervisors in detecting and preventing illicit fund flows in a proactive, rather than reactive manner.