What approach do the FATF and most regulators recommend for AML audits?

The risk-based approach targeting high-risk areas is favored by the FATF and most regulators for Anti-Money Laundering (AML) audits because it allows organizations to allocate resources more efficiently in the face of varying levels of risk associated with different customers, transactions, or regions. This method prioritizes the examination of areas where the potential for money laundering is highest, thereby enhancing the effectiveness of the audit process.

By focusing on high-risk areas, organizations can identify and mitigate threats more proactively. This approach aligns with the intentions of the FATF's recommendations, which emphasize understanding and addressing specific risks rather than applying uniform measures across the board. This tailored approach supports better compliance and a more effective response to the dynamic nature of money laundering tactics and techniques.

In contrast, a comprehensive approach focusing solely on low-risk areas would not utilize resources optimally, while a random approach to audit selection might miss critical vulnerabilities. Similarly, a one-size-fits-all strategy for audits does not adequately consider the unique risk profiles of different entities or circumstances. Hence, the recommendation for a risk-based approach is well-founded, as it enhances the chances of detecting and preventing illicit activities in the most vulnerable sectors.