Further Reading
Chapter 10: Customer Risk Rating and Enhanced Due Diligence
Essential Reading
FATF (2014). Guidance for a Risk-Based Approach: The Banking Sector. The authoritative international guidance on how the risk-based approach should be applied in banking, including customer risk assessment, EDD triggers, and PEP handling. Free at fatf-gafi.org.
FATF (2013). Guidance on Politically Exposed Persons. Detailed FATF guidance on PEP identification, risk assessment, and EDD requirements. Covers foreign PEPs, domestic PEPs, international organization PEPs, and family members/close associates. Free at fatf-gafi.org.
FinCEN (2016). Customer Due Diligence — Final Rule FAQ. FinCEN's FAQ document on the CDD Rule addresses customer risk profiling, beneficial ownership, and risk-based approach in the US context. Free at fincen.gov. Essential for US practitioners.
EBA (European Banking Authority) (2021). Guidelines on Customer Due Diligence and the Factors Credit and Financial Institutions Should Consider When Assessing the ML/TF Risk Associated With Individual Business Relationships and Occasional Transactions. The EU technical standard for risk-based CDD — highly detailed and authoritative for EU-regulated institutions. Sets out specific risk factors for customer, geographic, and product risk. Available at eba.europa.eu.
For Practitioners
FCA (2020). Financial Crime Guide for Firms (FCG 3: Due Diligence and Risk Assessment). The FCA's practical guidance on AML risk assessment, including customer risk factors, EDD requirements, and the handling of PEPs. Available at handbook.fca.org.uk. Essential for UK-regulated firms.
ACAMS (2022). Guide to PEP Compliance. Practitioner guide from the primary AML professional body covering PEP identification, screening, and EDD in detail. acams.org.
Wolfsberg Group (2017). Wolfsberg Group Frequently Asked Questions on Politically Exposed Persons. Industry consortium guidance on PEP handling — practical and internationally respected. Available at wolfsberg-principles.com.
LexisNexis Risk Solutions. True Cost of AML Compliance. Annual survey. Benchmarking data on compliance costs including KYC and EDD expenses — useful for capacity planning and program budgeting.
For the Curious
Findley, M., Nielson, D., & Sharman, J. (2014). Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism. Cambridge University Press. Academic study using sting operations to purchase anonymous shell companies from corporate service providers in multiple jurisdictions — directly relevant to the beneficial ownership opacity that EDD tries to penetrate.
Baker, R. (2005). Capitalism's Achilles Heel: Dirty Money and How to Renew the Free-Market System. Wiley. Foundational book on how illicit money flows through the global financial system, making the case for stronger beneficial ownership requirements. Remains essential background reading.
Knobel, A. (Tax Justice Network). PEPs and the Risk-Based Approach: A Critical Analysis. Critical analysis of whether the risk-based approach to PEP identification is applied consistently across jurisdictions and institutions — raises important questions about the consistency and effectiveness of EDD in practice. Available at taxjustice.net.
van Fossen, A. (2012). "Money Laundering, Global Financial Instability, and Tax Havens in the Pacific Islands." The Contemporary Pacific, 24(1), 1-43. Academic study of how Pacific island jurisdictions have been used in layering schemes — illustrates the geographic risk factors relevant to customer risk rating.
Regulatory Primary Sources
| Document | Jurisdiction | Key Relevance |
|---|---|---|
| 31 CFR 1010.230 | US | CDD Rule — customer risk assessment framework |
| FinCEN FIN-2016-G001 | US | CDD Rule guidance including risk-based approach |
| FATF Recommendation 10 | International | CDD requirements — risk-based approach foundation |
| FATF Recommendation 12 | International | PEP requirements |
| AMLD5, Articles 18–24 | EU | EDD requirements and mandatory situations |
| FCA SYSC 6.3 | UK | Systems and controls for financial crime |
| FCA Financial Crime Guide (FCG) | UK | Detailed FCA expectations for risk assessment |
| Money Laundering Regulations 2017 (Reg. 33–37) | UK | UK EDD requirements |
| EBA/GL/2021/02 | EU | Technical guidelines on CDD risk factors |
| PRA Supervisory Statement SS3/19 | UK | PRA expectations for AML risk management in major banks |
Technology References
| Resource | Description |
|---|---|
| PEP and Adverse Media Screening | |
| Refinitiv World-Check (LSEG) | Market-leading PEP + sanctions + adverse media database |
| Dow Jones Risk & Compliance | Comprehensive PEP and adverse media data |
| LexisNexis Bridger Insight | PEP and sanctions screening |
| ComplyAdvantage | AI-powered adverse media and PEP screening |
| Risk Rating Platforms | |
| Quantexa | Graph-based customer risk analytics |
| Napier AI | CRR automation with ML scoring |
| NICE Actimize | Integrated KYC/AML risk rating |
| Oracle Financial Services CDD | Enterprise CDD risk rating for banks |
| Source of Wealth Verification | |
| Kroll | Due diligence and background investigations |
| Mintz Group | High-net-worth due diligence |
| Control Risks | Political and integrity risk investigations |
Professional Development
ACAMS (Association of Certified Anti-Money Laundering Specialists) — CAMS certification covers customer risk rating and EDD extensively. ACAMS also publishes practitioner white papers on specific EDD challenges. acams.org.
ICA (International Compliance Association) — UK-based compliance certification programs covering AML risk assessment. int-comp.org.
Wolfsberg Group — The consortium's principles on EDD and PEP handling represent industry best practice. wolfsberg-principles.com.