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Risk-based Approach (RBA)

A risk-based approach (RBA) is a method of decision-making and resource allocation that involves assessing and prioritising risks to focus efforts on addressing the most significant or critical issues. The fundamental idea is to identify, analyse, and manage risks in a way that aligns with an organisation's objectives and helps optimise the allocation of resources.

In Crypto Regulations 

In crypto regulations, a risk-based approach refers to a regulatory framework or strategy that assesses and manages risks associated with activities involving crypto assets. This approach is commonly adopted by regulatory authorities to strike a balance between fostering innovation in the crypto ecosystem and mitigating potential risks such as fraud, money laundering, terrorist financing, and other illicit activities.

The European Banking Authority defines a risk-based approach as an: “[...] approach whereby competent authorities, PSP, IPSP, CASPs and ICASPs identify, assess, and understand the ML/TF risks to which PSP, IPSP, CASPs and ICASPs are exposed and take AML/CFT measures that are proportionate to those risks.

The Financial Action Task Force (FATF) defines it as:  “A risk-based approach means that countries, competent authorities, and banks identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk”.

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