Risk-based approach guidance for the securities sector
The risk-based approach (RBA) is central to the effective implementation of the FATF Recommendations. It means that supervisors, financial institutions, and intermediaries identify, assess, and understand the money laundering and terrorist financing (ML/TF) risks to which they are exposed, and implement the most appropriate mitigation measures. This approach enables them to focus their resources where the risks are higher.
The Guidance aims to support the design and implementation of the RBA, taking into account national ML/TF risk assessments and AML/CFT legal and regulatory frameworks. It describes various types of securities providers, business models and key characteristics of securities transactions that can create opportunities for criminals, as well as measures that can address such vulnerabilities. The development of the ML/TF risk assessment should be commensurate with the nature, size and complexity of the business. The most commonly used risk criteria are country or geographic risk, customer risk, product or service risk and intermediary risk. The Guidance provides examples of risk factors under these risk categories.
The Guidance clarifies the role and responsibilities of intermediaries that may be involved in securities transactions. It highlights that the nature of the business relationship between the securities provider, the intermediary and any underlying customers will affect applicable customer due diligence measures. In addition, as some business relationships in the securities sector might have characteristics similar to cross-border correspondent banking relationships; the Guidance also contains a description of how AML/CFT requirements apply to such cases.