Characterizing High Risk Clients

It is not uncommon for banks to deny potential clients, or offer unreasonable terms and conditions for the provision of service to undesirable clients, wishing to open an account.
However, whereas each bank has its own set of considerations and preferences which constitute the bank’s ideal customer profile, there are distinguished circumstances in which all banks will not only prefer to refuse to provide service, but, rather, will be legally obliged to do so; an instance of this occurs when banks suspect illicit activities, such as money laundering. Banks, under the prohibition of Money Laundering Law (AML), are actively obliged to identify and report any such illegal activity. In other words, banks must comply with anti-money laundering legislation, and, therefore, they ought to conduct independent inspections which single out dubious transactions.
Once banks conduct risk assessments, or, in light of the results received from ongoing monitoring of suspicious transactions and clients’ activities, a list of high risk clients is comprised.
The characteristics of high risk clients are as follows:

• During the due diligence procedure, these clients exhibit questionable behavior.
• Clients show interest in countries other than their permanent residency or in blacklisted countries.
• The legal structure of the business, the identity of the shareholders, the director and ultimate beneficial holders all imply that the clients and the business should be considered ‘high risk’.
• The clients demonstrate unusual behavior that does not conform to their business activities (for example, increased amount of payments in favor of payees or goods that greatly differ from the clients’ declared activity).
• Their profile does not comply with the profile of normative clients.
• The nature of the clients’ business operation is considered high risk.
• Their commercial relationships are irregular and somewhat shady, with further investigation raising the suspicion of High Money Laundry risk.
• The client’s ongoing business operation involves non-cash money transfers that are made upon the request of people who are not related to the business.
• The clients’ permanent residency is blacklisted.
• Background checks reveal that the clients are subjected to financial sanctions.
• The justifications for opening the account seem unreasonable, suggesting that the clients’ intentions are dubious and might be illegal.

Naturally, clients that are labeled ‘high risk’ will face immense difficulties when attempting to open corporate bank account, open any account in other financial institutions, work with payments, etc.