Risk-Based Approach
The Risk-Based Approach (RBA) is the fundamental principle that compliance measures should be proportionate to the level of risk identified. Regulated entities allocate more resources to high-risk clients and transactions, while applying simplified measures to low-risk situations.
The risk-based approach is the central pillar of FATF recommendations and European anti-money laundering directives. Rather than imposing a uniform level of control across all situations, it allows institutions to adapt the intensity of their due diligence measures based on risk assessments. This assessment considers the customer profile, the nature of the business relationship, the type of product or service, and geographical factors.
Implementing the risk-based approach requires developing a structured and documented risk classification. Institutions must define objective risk scoring criteria, establish differentiated procedures by risk level (simplified, standard, or enhanced CDD), and regularly review their methodology. Regulators such as the FCA, BaFin, and ACPR assess the relevance and consistency of this classification during their inspections.
CheckFile.ai aligns with this risk-based logic by offering scalable document verification: rapid automated analysis for low-risk profiles, and multi-layered in-depth checks for high-risk customers. This adaptability optimises compliance resources while maintaining an appropriate level of control for each situation.
Regulations
Real-world examples
- 1.A bank classifies its clients into three risk categories (low, medium, high) and adjusts the frequency of file reviews accordingly: every 3 years, annually, or semi-annually.
- 2.A payment institution applies simplified due diligence to transactions below 150 euros identified as presenting low risk.
- 3.An insurer strengthens controls on life insurance contracts from high-risk jurisdictions after updating its risk mapping.