tell me something about risk based approach, different types of risk categorization

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Risk-based approach involves assessing risks associated with customers and transactions to determine appropriate level of due diligence.

Risk-based approach is a method used by financial institutions to identify, assess, and mitigate risks associated with money laundering and terrorist financing.
Different types of risk categorization include customer risk, product risk, and geographic risk.
Customer risk categorization involves assessing the risk associated with individual customers based on factors such as their location, occupation, and transaction history.
Product risk categorization involves assessing the risk associated with specific financial products or services offered by the institution.
Geographic risk categorization involves assessing the risk associated with customers or transactions originating from high-risk jurisdictions.
For example, a high-net-worth individual from a politically exposed country would be considered high-risk in terms of customer risk categorization.

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