Client Risk Assessment
The process of evaluating the level of money laundering, terrorist financing, sanctions or other financial crime risk that a particular client poses to the institution based on factors like their background, jurisdiction, occupation, transaction patterns, and screening results.
Risk rating, client risk scoring
Examples
A person applies for a loan at a bank. The bank’s client risk assessment model takes into account the client’s occupation, country of residence, anticipated transaction volumes, and screening results. Based on these results, they establish that the person presents a low risk and thus expedite the process.
FAQ
What factors are commonly considered in client risk assessments?
Risk factors can include client type, occupation, country of residence, products used, transaction volumes and patterns.
How are risk assessment methodologies developed and validated?
Methodologies are based on regulatory guidance, industry standards, and the bank's risk appetite, and are tested and refined regularly.
How do risk assessments impact account monitoring?
Higher risk clients are subject to more frequent and in-depth reviews and lower transaction thresholds for alerts.
