What does conducting "risk-based" audits mean in AML compliance?

Conducting "risk-based" audits in AML compliance involves focusing audit efforts on areas that are deemed to have higher perceived risks of money laundering activities. This approach is essential because resources are often limited, and by directing attention to higher risk areas, organizations can effectively mitigate potential threats and vulnerabilities.

A risk-based audit model allows compliance teams to assess and prioritize risks based on various factors, such as transaction types, geographic locations, and customer profiles. By concentrating on these higher risk areas, organizations can better allocate resources, improve the effectiveness of their compliance programs, and ensure that they are in alignment with regulatory requirements.

This methodology recognizes that not all transactions or departments present the same level of risk and promotes a more strategic use of audit resources to guard against financial crime effectively.