Money laundering and terrorist financing risks

One of the key requirements of the FATF Recommendations is for countries, to identify, assess and understand the money laundering (ML) and terrorist financing (TF) risks that they are exposed to. Once these risks are properly understood, countries will be able to implement anti-money laundering and counter terrorist financing measures that mitigate these risks.

This risk-based approach, is central to the effective implementation of the FATF Standards and also applies to financial institutions and designated non-financial businesses and professions.

Many countries have chosen to publish information about the ML/TF risks to their financial system in the form of a national money laundering and terrorist financing risks assessment.  The publication of such a national risk assessment is not a mandatory requirement of the FATF Standards.  However, sharing this information will increase global understanding of ML/TF risk and may help countries identify, assess and understand where their own vulnerabilities lie.

Each country can determine how it will assess these risks. To assist countries in this process, the FATF has developed Guidelines that explain the general principles and steps involved in a risk assessment. The practices described in these Guidelines serve as examples and do not constitute specific measures that a country must take.

• Terrorist Financing Risk Assessment Guidance 
• National money laundering and terrorist financing risk assessment
  

Whatever approach a country chooses to identify, assess and understand the risks to its financial system, the FATF will assess the extent to which it has been able to do so in its peer reviews.  These reviews are based on the FATF Methodology for assessing technical compliance with the FATF Recommendations and evaluators will closely examine a country's risk assessment when evaluating recommendation 1 and immediate outcome 1.

Here are some examples of risk assessments published at national and regional level:

• Regional risk assessment 2016 South-East Asia / Australia - co-led by Australia and Indonesia, with contributions from Malaysia, the Philippines, Singapore and Thailand.
• EU Supranational Risk Assessment Report - 26 June 2017
• European Supervisory Authorities (ESAs) Joint Opinion on the Risks of Money Laundering and Terrorist Financing Affecting the Union’s Financial Sector - 20 February 2017
• GAFILAT Regional Threat Assessment, 2017