Combatting Money Laundering: An Analysis of the Risk-Based Policy Approach - The us and Uk Example

Abstract

This paper examines the Risk-based Approach policy developed by the Financial Action Task Force (FATF), a global standard - setting body set up to combat Money Laundering and Counter-Terrorism Financing. Global efforts to fight the crime of money laundering were initially rooted in enforcement procedures of criminalization of the offence. This encompassed investigating, prosecuting and confiscating the proceeds of crime. The several shortcomings of the enforcement procedure led to the development of the preventive strategy to curb the menace. This strategy referred to as the Risk-based Approach (RBA) is based on assessing the individual risks posed by customers or clients to organizations and taking commensurate step to mitigating such risks. It being the focal point of the FATF’s anti-money laundering regime, the RBA is made mandatory globally and stiff penalties are imposed for non-compliance.

The UK and US examples stem from the successes recorded by the jurisdictions in complying with the policy as revealed in their separate mutual evaluation reports. As such, this article does not attempt to compare both jurisdictions. The paper aims to educate both students and aspiring financial crime compliance professionals on the application of the Risk-based Approach in combatting money laundering and is a useful material for research.

Keywords: Anti-Money Laundering, Risk-based Approach, FATF