The risk-based approach (RBA) is one of the most fundamental principles in modern compliance and it’s central to the Joint Money Laundering Steering Group (JMLSG) guidance that underpins the UK’s AML framework.
In simple terms, a risk-based approach means focusing your compliance efforts where the risks are highest, rather than treating all clients or transactions equally. A straightforward client with a simple business model and transparent source of funds doesn’t warrant the same scrutiny as a complex structure operating in a high-risk jurisdiction.
The concept, originally reinforced by the FATF Recommendations and later embedded through JMLSG guidance, encourages firms to apply proportionate controls based on their understanding of customer, product, and geographic risk.
A genuine RBA isn’t about ticking boxes, it’s about judgement. It requires ongoing risk assessments, clear rationale for decisions, and staff who understand why certain controls exist.
Regulators don’t just expect to see policies; they expect to see evidence of understanding. A firm that applies its RBA consistently and can explain its decisions clearly will always be in a stronger position, both in audits and in practice.
If you’re designing or reviewing your firm’s risk-based approach, check out our Risk Support Statement template in the Resources section. It’s designed to help structure client reviews and document the rationale behind your risk assessments.
