ANTI-MONEY LAUNDERING, COMBATING

THE FINANCING OF TERRORISM &

COUNTERING PROLIFERATION FINANCING
(AML/ CFT/ CPF) REGULATIONS FOR STATE
BANK OF PAKISTAN’S REGULATED
ENTITIES (SBP-REs)
 REGULATION – 1

RISK BASED APPROACH (RBA)

TO AML/ CFT
 What is RBA?
 A risk-based approach is a method for identifying potential high
risks of money laundering and terrorist financing and
developing mitigation strategies.

Risk Assessment:
 A risk assessment is an analysis of potential threats and
vulnerabilities to money laundering and terrorist financing to
which the business is exposed.

 Based on the assessment, ML/TF risks should be classified as:

 High
 Medium
Risk Mitigation:
 To develop and implement policies and procedures to mitigate
the ML/TF risks they have identified through their individual
risk assessment:

 Customer due diligence (CDD) processes should be designed to

understand who their customers;
 Requiring them to gather information on what they do and why
they require financial services;
 To assess the ML/TF risk associated with a proposed business
relationship;
 Determine the level of CDD to be applied and deter persons
from establishing a business relationship to conduct illicit
activity.
 RBA to AML/ CFT
 SBP REs shall comply with risk based approach.
 SBP REs shall ensure an entity level Internal Risk Assessment
Report (IRAR) which covers Transnational TF risks.
 IRAR shall include results of National Risk Assessment (NRA).
 IRAR should be used for evaluating Residual Risk.
 SBP REs shall formulate policy for application of SDD, CDD and
EDD.
 Periodic updation of IRAR.
 SBP Res shall develop AML/ CFT/ CPF policies/ procedures/
controls/ obligations/ preventive measures.
Inherent Risk is typically
defined as the level of risk
in place in order to achieve
an entity's objectives and
before actions are taken to
alter the risk's impact or
likelihood.

Residual Risk is the

remaining level of risk
following the development
and implementation of the
entity's response.