4.1.3 Customer Risk

Effective from 13/7/2023

The customer risk factors relate to types or categories of customers. Certain customer or business relationship categories pose a risk that should be taken into account when assessing the overall level of inherent customer risk. When identifying certain categories of customers as inherently high risk, FIs should also consider the results of the NRA or any Topical Risk Assessment, as well as information from official sources, including the Supervisory Authorities, the FIU, the FATF, MENAFATF and other FSRBs, the Egmont Group, etc.

When assessing the customer risk factors with respect to the business-wide ML/FT risk assessment, an FI can take into account:

•	Type of customers: The risks related to retail customers in combination with their product/service needs may be different from those related to high net worth or corporate customers and their respective product/service needs. Likewise, the risks associated with resident customers may be different from those associated with non-resident customers.
•	Customer base. FIs with small, homogenous customer bases may face different risks from those with larger, more diverse customer bases. Similarly, FIs targeting growing or emerging markets may face different customer risks than those with more established customer bases.
•	Maturity of relationship. FIs that rely on more transactional, occasional, or one-off interactions with their customers may be exposed to different risks from institutions with more repetitive or long-term business relationships.

The specific customer risk factors that FIs should consider, include:

•	Categories of business relationships with complex legal, ownership, or direct or indirect group or network structures, or with less transparency with regard to Beneficial Ownership, effective control, or tax residency, may pose different ML/FT risks than those with simpler legal/ownership structures or with greater transparency.
•	Categories of Customers involved in highly regulated and supervised activities and those involved in activities that are unregulated.
•	Customers associated with higher-risk persons or professions (for example, foreign PEPs and/or their companies), or those linked to sectors associated with higher ML/FT risks.
•	Non-resident entities particularly those with connections to offshore and high risk jurisdictions.
•	Professionals (e.g., lawyers, accountants and TCSPs) acting as introducer or intermediary on behalf of customers or groups of customers (whereby there is no direct contact with the customer).
•	High net worth individuals.
•	Respondent banks from high risk countries.

Some of these customer risk factors are also relevant when determining the customer risk classification of an individual customer and the type and extent of customer due diligence to be performed (see Section 6, Customer Due Diligence).