7. The requirements in relation to risk-based supervision are set out in the FATF Recommendations and FATF assesses the effectiveness of AML/CFT supervision under Immediate Outcome 3 of the FATF Methodology.

8. Recommendation 1 (R.1) and its interpretative note (INR.1) explain the risk-based approach (RBA) and Recommendation 2 (R.2) highlights the importance of national co-ordination, including with and among AML/CFT supervisors. R.1 and INR.1 require jurisdictions to identify, assess and understand the ML/TF risks and to apply a RBA to mitigate the risks accordingly - this applies to supervisory activities. INR.1 requires supervisors to review and consider risk profiles and assessments developed by financial institutions and DNFBPs in applying the RBA. The RBA set out in R.1 is a foundation for allocating resources and implementing measures to combat ML/TF. The RBA applies in relation to:

• which entities should be subject to a jurisdiction's AML/CFT regime and to what extent they are subject to its obligations

• how those entities should comply with the AML/CFT requirements, and

• how those entities should be supervised (including the scope, frequency and intensity of the supervisory activities).