21. Under an effective risk-based supervisory framework, the supervisor identifies, assesses and understands ML/TF risks within the sector(s) and entities under its purview and mitigates them effectively on an ongoing basis. This involves implementation of a sound risk assessment system that enables the identification, measurement, control and monitoring of ML/TF risks, as well as a risk-based supervisory approach that enables timely supervisory intervention to address any significant changes or elevation in risks. More specifically, the supervisor:

• Develops and maintains a good understanding of ML/TF risks at the sectorial as well as entity level based on sound risk assessment of inherent risks and quality of mitigation measures and informed by national ML/TF risk assessment (see section 2. and note the new requirements to assess PF risk and refer to FATF's forthcoming PF Guidance);

• Develops and implements a supervisory strategy that effectively directs supervisory focus to higher or emerging ML/TF risks while ensuring that there are appropriate, risk-based strategies in place to address lower risks effectively and efficiently without impacting unnecessarily on access to and usage of financial services (see section 3.);

• Positively influences entities' behaviour by ensuring they have effective AML/CFT policies in place and where issues are identified, providing targeted guidance and feedback, directing and/or overseeing remedial actions and exercising enforcement powers in a dissuasive and proportionate manner taking risk, context and materiality into account;