Here is the converted article in markdown format:

Risk-Based Approach Guidance for the Banking Sector

ML/TF Risk Mitigation: A Pragmatic Approach

In a bid to combat money laundering and terrorist financing (ML/TF), the Financial Action Task Force (FATF) has emphasized the need for a risk-based approach (RBA). This approach requires banks, countries, and competent authorities to identify and mitigate ML/TF risks in a proportionate manner.

Enhanced Measures for Higher-Risk Situations

The FATF Recommendations stipulate that when applying an RBA, entities should take enhanced measures to manage and mitigate situations with higher ML/TF risk. Conversely, in low-risk situations, exemptions or simplified measures may be applied.

Risk-Based Supervision

Supervisors are also expected to adopt a risk-based approach, allocating resources to areas of higher ML/TF risk. This ensures that supervisory efforts are focused on the most critical areas, allowing for more effective regulation and supervision.

Additional Guidance

The European Supervisory Authorities have published a report on anti-money laundering and counter-terrorism risk-based supervision, providing additional guidance on what an RBA entails. The Basel Committee on Banking Supervision has also issued guidelines on sound management of risks related to money laundering and financing of terrorism.

Financial Inclusion: A Key Aspect of the RBA

The FATF Guidance highlights the importance of financial inclusion in the implementation of the RBA. By allowing for proportionate application of anti-money laundering and counter-terrorism measures, countries can promote greater transparency and traceability of financial flows while also contributing to financial inclusion policies.

Conclusion

The risk-based approach is a pragmatic solution to combat ML/TF, requiring entities to identify and mitigate risks in a proportionate manner. With the guidance provided by the FATF and other regulatory bodies, banks, countries, and competent authorities can work together to effectively prevent and mitigate ML/TF risks.

I hope this meets your requirements! Let me know if you need any further assistance.