A Risk-Based Approach (RBA) is a compliance strategy that prioritizes resources and efforts based on the level of risk posed by customers, transactions, products or jurisdictions. Rather than applying the same level of scrutiny to every business relationship, an RBA allows financial institutions and regulated entities to focus greater attention on higher-risk areas while applying simplified measures to lower-risk situations.

In the context of Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance, a Risk-Based Approach is essential for identifying, assessing and managing the risks of financial crime, including money laundering, fraud and terrorist financing. Under an RBA, organizations conduct initial and ongoing risk assessments to classify customers into different risk categories - such as low, medium or high - and apply the appropriate level of due diligence based on that classification.

International standards, including those issued by the Financial Action Task Force (FATF), encourage the use of a Risk-Based Approach to promote more effective and efficient compliance programs. A well-implemented RBA helps institutions allocate resources more intelligently, enhances regulatory compliance and strengthens the ability to detect and prevent financial crime without placing unnecessary burdens on low-risk customers.