The Financial Action Task Force (FATF) has recently issued new detailed guidance on Anti-Money Laundering (AML) National Risk Assessments (NRAs), reinforcing the global effort to enhance the identification, assessment, and mitigation of money laundering and terrorist financing risks. This updated guidance aligns with FATF’s continuous approach to developing smarter, risk-based AML frameworks that support both regulatory compliance and financial inclusion.
Background and Purpose of FATF NRA Guidance
FATF’s updated guidance aims to assist countries in conducting comprehensive National Risk Assessments with a focus on money laundering (ML) risks. NRAs are critical tools that help countries understand and prioritize their vulnerabilities to ML and terrorist financing (TF), enabling governments and financial institutions to apply more effective, risk-based controls. The guidance provides a flexible but structured methodology to evaluate threats, vulnerabilities, and associated risks, encouraging prudent resource allocation to areas of highest risk.
The new guidance emphasizes that NRAs should be inclusive processes, engaging competent authorities, private sector stakeholders, and international partners to ensure data accuracy and robust risk profiling. Additionally, FATF highlights the importance of transparent communication of NRA findings to foster targeted mitigation strategies and continuous refinement of risk assessments to reflect evolving threats.
Key Elements of the Updated Guidance
The FATF guidance is organized into three crucial sections:
- Preparation and Setup of NRA: Countries are advised to establish clear governance, coordination mechanisms, and objectives before starting the NRA exercise. This includes defining the scope, assigning roles, and gathering data from various sources including law enforcement, financial institutions, and other relevant stakeholders.
- Assessing and Understanding Money Laundering Risks: The methodology focuses on systematically analyzing predicate offenses linked to ML, terrorist groups involved in TF, sectoral vulnerabilities (including financial institutions, Virtual Asset Service Providers (VASPs), designated non-financial businesses and professions (DNFBPs), and non-profit organizations). It also incorporates national-level vulnerabilities and consequences of ML/TF activities.
- Post-NRA Actions: After risk identification, the guidance stresses the importance of aligning mitigation measures with the assessed risks, communicating outcomes to relevant sectors, and regularly updating the NRA process to respond to emerging risks and ensure continuous improvement.
Emphasis on Proportionality and Financial Inclusion
A significant advancement in the updated guidance involves an enhanced focus on proportionality. FATF encourages use of simplified AML/CFT measures where risks are assessed to be lower, which aims to ease compliance burdens on lower-risk entities while focusing resources on higher-risk areas. This principle supports global financial inclusion by enabling regulated entities and national regulators to balance AML controls with expanded access to financial services. Nonetheless, FATF acknowledges the challenges in clearly identifying low-risk scenarios and calls for practical examples and case studies to guide implementation.
Integration with Other Regulatory Developments
The recent guidance builds on FATF’s broader AML/CFT standards and aligns with other regulatory priorities for 2025, including increased transparency on beneficial ownership, heightened scrutiny of virtual assets and decentralized finance (DeFi), and enhanced public-private collaboration. Financial institutions are urged to transition from traditional box-checking compliance to more evidence-based, data-driven AML programs. This is crucial in addressing sophisticated financial crimes that exploit gaps in technology and oversight.
Global Impact and Country-Level Implementation
Countries like the United Kingdom and Pakistan have incorporated FATF’s NRA framework with modifications tailored to their unique contexts. Pakistan’s 2023 NRA, for example, uses an in-house hybrid methodology to update its ML/TF risk profile, involving extensive data collection and expert validation processes. The UK’s NRA continues to inform national economic crime priorities and regulatory resource allocation. FATF’s guidance supports these efforts by providing an adaptable and comprehensive risk assessment approach that countries can use to strengthen their AML defenses.
Conclusion
FATF’s new guidance on AML National Risk Assessments marks a pivotal step in enhancing global AML/CFT frameworks. By promoting inclusive, risk-based methodologies and proportionality principles, FATF aims to improve the effectiveness of AML systems while enabling greater financial inclusion. Countries and financial institutions worldwide must adapt their risk assessment and mitigation practices to align with this updated guidance to better detect and prevent money laundering and terrorist financing risks in a rapidly evolving financial landscape.
This guidance reflects FATF’s ongoing commitment to protecting the integrity and stability of the international financial system, supporting sustainable economic growth, and fostering stronger public-private cooperation in the fight against financial crime.
AML Editor’s article was originally published in step on 01 September 2025