According to the risk-based approach, financial institutions should apply enhanced due diligence and ongoing monitoring to higher-risk clients, and take appropriate measures to mitigate the risks of money laundering and terrorist financing. If the client exceeds the criteria of an acceptable risk model created by the institution, the institution should communicate the issues to the client and request remedial actions, such as providing additional information, documentation, or evidence of compliance. If the client does not cooperate or comply with the institution's requirements, the institution should consider terminating the relationship with the client, as the risk may outweigh the benefits of continuing the business relationship.
References:
* ACAMS CAMS Certification Package - 6th Edition, Chapter 2: Risk Assessments, pp. 51-521
* ACAMS CAMS Certification Package - 6th Edition, Chapter 4: Customer Due Diligence, pp. 97-981
* ACAMS CAMS Certification Video Training Course, Module 2: Risk Assessments, Lesson 2.3: Risk- Based Approach2
* ACAMS CAMS Certification Video Training Course, Module 4: Customer Due Diligence, Lesson 4.3:
Enhanced Due Diligence
Reference:
http://www.fatf-gafi.org/media/fatf/documents/reports/Risk-Based-Approach-Banking-Sector.pdf

The Office of Foreign Assets Control (OFAC) is a department of the U.S. Treasury that administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals1. OFAC regulations cover all persons and entities within the U.S., all U.S.-domiciled entities and their foreign branches, and all U.S. citizens, wherever located or employed2. These include U.S. banks, U.S. corporations,
U.S. subsidiaries of foreign corporations, U.S. residents, and U.S. citizens living or traveling abroad3. OFAC regulations do not cover foreign-based entities that have U.S. customers, unless they are owned or controlled by U.S. persons or entities4.
References: 1: Home | Office of Foreign Assets Control 2: eCFR :: 31 CFR Chapter V - Office of Foreign Assets Control, Department of the Treasury 3: FFIEC BSA/AML Office of Foreign Assets Control - Office of Foreign Assets Control 4: Office of Foreign Assets Control (OFAC): Definition, Sanctions

According to the Basel Committee guidelines, banks should formulate a customer acceptance policy and a tiered customer identification programme that involves more extensive due diligence for higher risk customers12. The customer acceptance policy should be approved by senior management and include clear guidelines on the types of customers that are likely to pose a higher than average risk to the bank1. Senior management should also ensure that the bank has adequate resources and systems to effectively manage the risks associated with higher risk customers1. Therefore, senior management should determine whether or not to enter business relationships with higher risk customers, based on the bank's risk appetite, policies, and procedures.
References:
CAMS Study Guide (the 6th edition), page 1843
Customer due diligence for banks - Bank for International Settlements1
The Basel Committee: The Important Set Of International Banking Regulations2

The Office of Foreign Assets Control (OFAC) is a department of the US Treasury that administers and enforces economic and trade sanctions imposed by the US against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. The main purpose of the US Treasury Department for OFAC's extraterritorial reach is to apply these sanctions to any person or entity that is subject to US jurisdiction, or that engages in transactions involving US persons, US dollars, or US goods or services. This way, the US can exert pressure on the targets of the sanctions and prevent them from accessing the US financial system or market. OFAC's extraterritorial reach is authorized by Congressional legislation or presidential emergency powers, and is often based on UN Security Council resolutions or multilateral agreements.
References:
* Office of Foreign Assets Control (OFAC): Definition, Sanctions
* About OFAC | Office of Foreign Assets Control
* OFAC's Extraterritorial Reach: Purpose of the US Treasury Department
Reference: https://www.natlawreview.com/article/aggressive-extraterritorial-reach-us-economic-sanctions- foreign-company-exposure-to