Promoting Financial Inclusion Through the Risk-Based Approach: Takeaways From FATF's Training

Today our team attended the Financial Action Task Force (FATF)'s webinar on promoting financial inclusion through the risk-based approach (RBA) to AML/CFT. Rather than summarising the session, I want to share the points that resonated with me most — particularly in light of recent FATF developments.

Key Revisions to the FATF Standards

The February 2025 revisions to the FATF Standards include six important changes that strengthen the risk-based approach:

1. Proportionate measures: Measures should be proportionate to the risk identified, rather than merely “commensurate.”

2. Supervisory responsibility: Supervisors must ensure subject persons implement obligations proportionately.

3. Encouraging simplified measures: Countries should actively allow and encourage simplified measures in lower-risk scenarios.

4. Differentiation by risk: Subject persons should tailor measures according to risk, as opposed to "may" strengthening proportional application.

5. Low-risk exemptions: Clarifies exemptions in “limited circumstances with assessed low ML/FT risks,” rather than in "strictly limited" circumstances with "proven" ML/FT risks, making exemptions more practical.

6. Non-face-to-face relationships: Considered higher risk only if appropriate mitigating measures are not implemented, acknowledging the prevalence of non-face-to-face interactions nowadays.

Practical Challenges

The webinar included a participant survey showing common private sector challenges:

• Limited resources to differentiate measures

• Limited understanding or confidence in applying simplified measures

• Fear of penalties

• Need for clearer guidance from supervisors

  
  

These mirror the challenges faced locally, which is why guidance, such as this training, is essential.

Quotes That Stuck With Me

1. “Over-compliance is not in line with FATF Standards.” Excessive measures do not equal better compliance.

2. “More where necessary, less where possible.” Sufficient measures should be applied for higher-risk cases, but low-risk transactions should not be overburdened.

3. “Risk-based execution requires risk-based supervision.” Private sector compliance depends on supervisors applying the same risk-based principles.

   
   

Closing Thoughts

What resonated most is the need for balance-more where necessary, less where possible. AML obligations are critical, but so is ensuring legitimate clients are not excluded or unduly burdened. With the FATF revisions, subject persons and supervisors alike need to confidently apply proportionate measures.

This reminded me of the work I had carried out at the time while drafting Malta's paper on applying the Risk-Based Approach in the Real Estate Sector published in 2024.

In the real estate sector, this means:

• Applying enhanced measures for genuinely higher-risk transactions

• Avoiding excess measures in lower-risk deeds

• Documenting and justifying decisions based on risk

  
  

If you’re looking for support in applying proportionate Customer Due Diligence for your transactions, feel free to reach out.

The content of this article is based on personal views and professional interpretation of information presented in the public FATF webinar. It does not constitute legal, regulatory, or professional advice and should not be relied upon as such.