Financial Crime World

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Risk-Based Approach to Financial Crime Risk Management Crucial for Malaysia’s Banking Sector

Kuala Lumpur - The Fight Against Money Laundering and Terrorist Financing

In the ongoing fight against money laundering and terrorist financing, a risk-based approach has emerged as a critical component of effective financial crime risk management. This approach enables countries, competent authorities, and banks to identify, assess, and mitigate risks accordingly, ensuring that resources are allocated efficiently.

Benefits for Malaysia’s Banking Sector

Malaysia’s banking sector stands to benefit significantly from adopting this strategy, which would allow for more targeted measures to be taken in areas where the risks are highest. By applying a risk-based approach, banks can avoid the consequences of de-risking behaviour, which can have unintended consequences such as limiting access to financial services for legitimate customers.

Key Requirements for Implementation

According to experts, the implementation of a risk-based approach will require:

  • A deep understanding of national risk assessments
  • Familiarity with the local legal and regulatory framework
  • Collaboration between supervisory authorities and banks to develop a common understanding

Guidance on Implementing the Risk-Based Approach

Guidance on implementing the risk-based approach has been developed, including specific sections tailored for banking supervisors and banks themselves. The guidance includes practical examples to aid in the implementation process, making it easier for institutions to understand the various elements involved.

Impact on Malaysia’s Banking Sector

The adoption of a risk-based approach will be crucial in Malaysia’s ongoing efforts to combat financial crime, and experts believe that it has the potential to make a significant impact on the country’s banking sector. Those interested in learning more about the FATF Recommendations and the risk-based approach can contact the FATF Secretariat at +33 (0)1 45 24 90 90 or email contact@fatf-gafi.org.