Who are “high risk” clients for banks and payment systems?

Banks and payment systems often face various risks associated with financial transactions. One of these risks is connected with suspicious transactions related to money laundering, terrorist financing and other illegal activities.

To reduce these risks, banks and payment systems use various methods, including checking clients for compliance with the requirements of anti-money laundering legislation, in particular AML. As a result of such a check, the client may be assigned the “high risk” status, which means that he poses an increased risk to the financial institution.

Recognition of “high risk” clients

Clients that may be considered “high risk” typically fall into one of the following categories:

• Carrying out operations that do not correspond to their profile. For example, if a customer who usually makes small transactions suddenly starts making large transfers, this may raise the bank’s suspicions.
• Clients operating from jurisdictions considered “unfriendly”. For example, banks may be wary of clients from countries that are under sanctions, for example, the Russian Federation, Belarus, etc.
• Clients who are affiliated with persons suspected of involvement in illegal activities. For example, if the client is associated with an individual or legal entity that has been found to be involved in money laundering.
• Companies or individuals with a history of financial difficulties or a low credit rating may be considered “high risk”.
• Some industries, such as gambling, dating, casinos or cryptocurrencies, are considered riskier due to their volatility and possible negative consequences.
• Clients whose activities may conflict with legislation or security standards also fall into the “high risk” category.
• Clients with unclear or dubious business reputation. These include, for example, clients registered in jurisdictions with high levels of corruption or political risks.
• Customers engaging in transactions that do not fit their business model or nature of activity. For example, if a legal entity engaged in the wholesale trade of food products begins to engage in transactions with large amounts of cash, this may become the basis for classifying it as “high risk”.
• Clients who do not provide the bank or payment system with the necessary information about themselves and their activities. For example, a client who refuses to provide the bank with information about his founders or directors may be classified as “high risk”.

Thus, “high risk” clients can be diverse, including firms with unstable financial histories, individuals involved in industries where there is a high level of uncertainty and risk, and those whose actions could lead to violations of laws or safety standards.

What measures can be taken for “high risk” clients?

Banks and payment systems can apply various measures to high-risk customers aimed at reducing the risk of committing suspicious transactions. Such measures may include:

• Tightening requirements for customer verification – a bank may require a client to provide additional documents or information or increase the frequency of the KYC procedure.
• Restriction of client transactions – a bank may prohibit a client from making large transfers or using certain payment instruments due to doubts about their origin.
• Establishment of additional requirements for transactions – a bank may require a client to provide additional documents or information, as well as coordinate each transaction with him.
• Refusal to serve the client – in extreme cases, a financial institution may terminate the contract for the provision of services or refuse to cooperate at the initial stage of acquaintance.

It is worth knowing that today financial institutions even use modern technologies such as artificial intelligence and blockchain to improve risk identification systems and prevent fraud among “high risk” clients. Therefore, you should not expect to be able to trick the system or circumvent its strict compliance requirements.

How to avoid “high risk” status?

As high-risk status has many negative consequences, it is important to follow a few simple rules in order to avoid this “high risk” label:

1. Fill out documents correctly and provide reliable information to the bank.
2. Do not make transactions that do not correspond to your profile, limits, or income.
3. Avoid cooperation with persons suspected of involvement in illegal activities.
4. Conduct regular audits of your activities to identify possible risks.
5. Comply with the requirements of the bank or payment system regarding transactions.

In conclusion, it should be noted that the “high risk” status is a serious red flag for banks and payment systems. Almost all European banks categorically do not want to serve such clients. Today, there are only a few options for opening an account for the high-risk category in payment systems, and not in all of them.

Therefore, if your activity is high-risk, but you need a transaction account in Europe, contact our specialists, we will analyze your portfolio and help you go through compliance procedures with financial institutions that will be loyal to you. Trying to open an bank account on your own for a high-risk business or client without trained lawyers will be unsuccessful and will only worsen your situation in the future.