2.2.2. Service and Transaction Risk Factors
Effective from 31/10/2022Service and transaction risk can be assessed by identifying how vulnerable a product is to use by a third party or unintended use based on the methods of transaction available. Service and transaction risk is influenced by product design. Understanding potential service and transaction risks in the business is a significant factor in recognizing unusual activity at a customer level.
The following table describes attributes used to assess service and transaction risk and provides lower-and higher-risk examples of each.
| Attribute | Lower-risk example | Higher-risk example |
| Difficulty in tracing ownership of funds | Preprinted checks, bill payments, and electronic funds transfer (EFT) payments with verified banking records | Cash, bank drafts in bearer form, travelers checks, counter checks (where ownership information is handwritten or typed in a different font than the rest of the check), and potentially some digital currencies |
| The customer is not the payer or recipient of the funds | The funds are moved from or to another financial institution | The third-party paying or receiving funds has not previously been disclosed |
| Payment source or recipient is based outside of the country | The recipient or payer is the policyholder and is in a low-risk country | The recipient or payer is the policyholder and is in a higher-risk country or is a third party outside the country (making it more difficult to trade or confirm the source of funds) |
| Number of transactions | The low number of transactions or transaction frequency that is typical for the product | A large number of transactions back and forth with the customer or third parties, especially where it exceeds typical usage for the product |
| Transactional patterns | Regular and expected customer account activity | Significant, unexpected, and unexplained change in the customer’s typical activity, such as early surrenders or withdrawals where such service is offered |