FATF Strengthens Risk-Based Approach in Latest Recommendations

The Financial Action Task Force (FATF) has recently released key updates to its global Recommendations, further reinforcing the shift toward a risk-based approach in Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) compliance.

This update is a step in the right direction. For too long, compliance obligations have followed a one-size-fits-all framework... Treating every customer with the same level of scrutiny, regardless of their risk level. FATF’s updated guidance acknowledges what many in the industry already know: not all customers pose the same risk, and compliance efforts should reflect that. It's a great initiative that focuses even more on the risk-based approach and acknowledges that the compliance burden on regulated companies can be too high - especially for low-risk customers.

“Proportionate” Replaces “Commensurate”

FATF has replaced the term commensurate with proportionate across its Recommendations and Interpretive Notes. This change reinforces clarity and aligns more directly with the practical application of AML/CFT controls.

Proportionality means that compliance measures should match the actual level of risk​.

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Simplified Measures Must Be Allowed for Low-Risk Scenarios

FATF now explicitly requires countries to enable simplified AML/CFT measures for lower-risk customers and activities.

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Supervisors Must Account for Risk Mitigation Efforts

Supervisors are now obligated to take into account risk mitigation measures already implemented by financial institutions and DNFBPs (Designated Non-Financial Businesses and Professions). This is designed to prevent overcompliance when there’s a partial or outdated understanding of the actual risk level. It also introduces greater accountability on regulators themselves to apply proportionality​.

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Non-Face-to-Face Transactions = Higher Risk? Not Necessarily Anymore

In a modernizing move, FATF now states that non-face-to-face transactions should only be treated as higher risk if no appropriate mitigation is in place.

This is a major shift that recognizes the growing global reliance on remote interactions and digital identity solutions.

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Financial Inclusion + AI: Public Consultation

FATF has also launched a public consultation on financial inclusion and AML/CFT measures - inviting case studies on how AI and tailored approaches can help extend services responsibly in both low- and non-low-risk environments.

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What Do These FATF Standard Changes Mean for Compliance Teams?

If you’ve been hoping for a future where Know Your Customer (KYC) is smarter, not heavier, these changes are good news! They place greater emphasis on a risk-based approach while recognizing that compliance demands on regulated companies may be excessive - particularly when dealing with low-risk customers.

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For a link to the full updated version: https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Fatf-recommendations.html

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