What is the risk-based approach?
A regulatory philosophy, formalised in FATF Recommendation 1, that obliges financial institutions to identify, assess, and understand their ML/TF risks and apply control measures commensurate with those risks. It replaced the older rules-based approach in international standards in 2012. The RBA explicitly rejects "one-size-fits-all" controls and requires documented justification for any tier of due diligence applied.