Sinha, Gauri (2020) Risk-based approach : is it the answer to effective anti-money laundering compliance? In: Benson, Katie , King, Colin and Walker, Clive, (eds.) Assets, Crimes and the State: Innovations in 21st Century Legal Responses. Abingdon, UK : Routledge. ISBN 9780367025922 (In Press)

Abstract

This chapter aims to critically analyse the risk-based approach in the UK anti-money laundering regime, with a focus on banks and financial institutions. It is particularly relevant in the current climate as the recently enacted Money Laundering Regulations 2017 place significant emphasis on the risk-based approach at all levels of compliance. The risk-based approach is considered at two levels: (i) by questioning the definition and application of ‘risk’ as interpreted in recent changes to the law, and (ii) by highlighting the contradiction between how the legal requirements define the risk-based approach, and how the Financial Conduct Authority seeks to implement it. It is argued that the risk-based approach has not been successful in removing the deficiencies of the rule-based approach. Instead, it has led to a culture of ‘tick-box exercise’ amongst banks and financial institutions. Increasing penalties by the FCA contribute to this defensive compliance, highlighting the need for public-private collaboration.

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