Risk-based approach
RBA
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Principle under which the scope and depth of due diligence depend on the specific money-laundering risk.
Typical risk factors are links to countries, the industry, PEP status, the complexity of the structure and the type of transactions.
In practice
The risk-based approach starts with a documented risk analysis of the office's own business: client base, countries, products and channels. Risk categories for the individual relationships are derived from it – with clear criteria, so that similar cases are classified alike. The category determines the depth of the checks, the review cycle and the approval levels. Traceability is decisive: any deviation is justified in the file.
Distinctions and common mistakes
The risk-based approach allows simplified checks where the risk is low, but no waiver of basic duties such as identification and establishing the beneficial owner. Typical mistakes are risk classifications without traceable reasons, criteria that are never updated and a low rating for complex structures with links to several countries.
Relevant in: Switzerland · Germany · Austria · Liechtenstein · EU-wide
Related terms
- High-risk country
- A country with strategic deficiencies in combating money laundering and terrorist financing, in particular according to the FATF lists.
- Politically exposed person
- A person who holds or has held a prominent public function, as well as their family members and persons known to be close associates.
- Ongoing monitoring
- Continuous review of a business relationship and updating of client data throughout its duration.
Mentioned in these guides
- The risk-based approach in a family officeHow the risk-based approach under Swiss, German and Austrian AML law and the FATF works: risk factors, risk classes, graduated due diligence and documentation.