Dear AML subscribers, AML regulations in the UAE envisage adopting a risk-based approach to mitigate the risk of financial crime; the higher the risk, the stricter the AML controls. Accordingly, regulated entities must conduct a customer risk assessment to classify each customer risk category – as low, medium or high – and implement methods to prevent or mitigate these risks.

In this video we discuss the risk parameters to consider when conducting a customer risk assessment to identify the money laundering and terrorist financing crime they pose to the company, including the intensity of the risk.

Customer risk profiling can be performed based on the following primary risk indicators:
• Type or nature of the customer
• Transactional parameters
• Risk arising from the customer's jurisdiction
• Peculiarities of the products/services
• Engaged delivery channels

If you are a cooperative customer or a UAE resident, the risk of such a customer can be considered low. A customer without negative media or a non-PEP customer has low ML risks. But the risk is moderate if you find a client with high net worth, non-resident and complex business structure.

Although customers engage in goods or services related to money laundering, typologies such as virtual asset service providers or designated non-financial businesses and professions may be perceived as presenting a slightly higher risk.

A customer with a criminal history or who is evasive and uncooperative arouses great suspicion. The risk is unacceptably high if the customer is on a sanctions list.

If the customer makes the payment from his own bank account, check or bank transfer, such transactions can be considered safe from the perspective of financial crime exploitation. Also assume that the value of the transaction is normal (normal for the customer or a similar customer given the nature of the customer or the type of business activities) or consistent with the economic profile of the customer. In that case, the risk of such a customer is on the low side.

A cross-border transaction or involvement of agents or a high frequency of transactions are medium risks. An unusually high value or all-cash payment transaction may pose a higher risk of financial crime. Customers are considered high-risk if they insist on paying through an unrelated third-party account or using virtual assets without any business reason.

One of the crucial elements of customer risk profiling is the customer's jurisdiction. A country that is not subject to any sanctions, that has strict regulations to combat financial crime, that is known for its fight against corruption and other predicate crimes, or that has transparent financial reporting requirements, is treated as a country with a lower ML FT risk to the company.

A customer from a country or jurisdiction with
• Vague financial reporting requirements
• Weak laws on money laundering or terrorist financing
• A tax haven country
• Notorious for corruption and bribery
• Political instability
• On the FATF black or gray list

The company poses an increased risk of money laundering and terrorist financing.

The characteristics of a product or service can also determine a customer's risk profile. For example, ML activities do not occur in routine products, services or goods that are difficult to move. A product with transparency about its ownership is not suspicious.

A customer becomes suspicious if he deals in luxury items, maintains less or weak documentation, or is associated with an unregulated industry. It is very risky when the customer's goods are dual-use or carry out a series of small transactions of high-value goods or services related to financial crime typologies.

Customers who regularly have direct personal contact without the intervention of agents or make payments from their own bank account are not suspicious.
But you should be suspicious if a customer avoids face-to-face meetings without any business sense or insists on using third parties or intermediaries without any business sense.

Trust this video to help you design your Customer Risk Profiling methodology and adequately identify the risks your customers pose to your business.

Stay tuned for more videos on various AML measures.

Chapters:
0:00 Introduction to the customer's risk profile
0:41 Primary risk indicators for customer risk profiling
1:02 Customer-specific risk
1:52 Transaction-specific risk
2:42 Customer jurisdiction-related risk
3:30 Product/service specific risk
4:08 Risk related to the delivery channel

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