Money laundering risk understanding is a foundational element on which a national AML/CFT system is built. This is reinforced by Recommendation 1 of the FATF Standards, which requires countries to “identify, assess and understand” its money laundering risks, and to take action to ensure that these risks “are mitigated effectively”.
The development of an accurate and up-to-date risk understanding is an ongoing, dynamic process for a country. A process that necessitates responding to changing environmental factors, constantly assessing new information and scanning the horizon for risks that may be emerging or materialising. Accordingly, it is important that a country takes a structured and coherent approach to developing an up-to-date risk understanding. Once such common approach for a country to take is through the conduct of a National Risk Assessment (NRA).
An NRA is a comprehensive process used by countries to identify, assess, and understand the ML and/or TF risks they face. This process involves evaluating threats and vulnerabilities, determining the level of risk, and developing strategies aligned to ML risks. This includes taking enhanced measures where risks are higher and taking simplified or lesser measures where risks are lower. While the end result of the process may or may not be a written product, the understandings reached, and follow-on actions taken are of paramount importance.
The NRA provides an evidence-based foundation for informed policymaking, resource allocation, and the implementation of effective AML/CFT measures. It ensures that national strategies are aligned with the specific risk landscape of the country and that they address both domestic and international threats to the extent they are connected to the country.
The purpose of this document is to assist countries in conducting an NRA focused on the assessment of money laundering risks. This document has been developed considering the experience of a range of countries from across the FATF Global Network in the last decade – more than 90 contributed to this guidance – and is meant to demonstrate good practices that have been used by countries to assist others in tailoring these good practices into their own national context. This document contains three sections:
Section 1: NRA Preparation and Set-up – This section identifies the prerequisites to a successful NRA. It covers such key foundational parts of the NRA such as political commitment, an inclusive NRA mechanism, objective setting, and the acquisition of information and data. These steps are not necessarily linear steps, but all should be considered and in place before the analytical work of the NRA can begin.
Section 2: Assessing and Understanding Money Laundering Risks – This section provides a linear, structured approach for countries to follow in conducting their analysis of threats, vulnerabilities, and risks. There is no set methodology that countries must follow, and a country’s NRA process should have regard to its capacity, as well as its unique risk and context. However, the series of steps outlined here has been identified as a good practice
Section 3: Post-NRA Actions – This section identifies simultaneous practices that a country should undertake after the conclusion of the analytical process. It covers the measures that a country could take to ensure that its ML mitigation measures are commensurate with the risks identified., the communication of the NRA’s findings, and refining of the NRA process.
November 7, 2024 Published by The FATF The Financial Action Task Force. (Download Report)
