On March 4, 2021, the Financial Action Task Force published its Guidance for Applying a Risk-Based Approach to AML/CFT Supervision. According to FATF, the Guidance helps supervisors address a broad range of risks while using resources to tackle higher risk areas; and notable for World Council is that an objective of the Guidance is to create a risk-based approach that supports financial inclusion by creating a regulatory environment that is “less burdensome on lower risk sectors or activities”. The Guidance further includes proportionality language throughout the document and advises that, “Supervisors should also consider transparency, consistency and proportionality in applying remedial actions or sanctions…”
The guidance is comprised of three parts:
- “Part 1 – The high-level guidance on risk-based supervision, which explains how supervisors should assess the risks their supervised sectors face and prioritise their activities, in line with the FATF Standards’ risk-based approach.
- Part 2 – Strategies to address common challenges in risk-based supervision & jurisdictional examples, including examples of strategies for supervising non-financial businesses and professions and virtual asset service providers.
- Part 3 – Country examples from across the global network, of supervision of the financial sector, virtual asset service providers and other private sector entities.”
World Council commends FATF’s risk-based and proportionate approach to AML/CFT Supervision and looks forward to FATF’s continued efforts to improve financial inclusion.