Risk Categorization of Customers

Risk Categorization of Customers

Types of customers and their risk categorization -

High Risk Customers

  1. Individuals and entities in various United Nations Security Council Resolutions (UNSCRs) such as UN 1267etc.
  2. Individuals or entities listed in the schedule to the order under section 51 A of the Unlawful Activities (Prevention) Act, 1967 relating to the purposes of prevention of and for coping with terrorist activities.
  3. Individuals and entities in watch lists issued by Interpol and other similar international organizations.
  4. Customers with dubious reputation as per public information available or commercially available watch lists.
  5. Individuals and entities specifically identified by regulators, FIU and other competent authorities as high-risk.
  6. Customers conducting their business relationship or transaction in unusual circumstances, such as significant and unexplained geographic distance between the institution and the location of the customer, frequent and unexplained movement of accounts to different institutions in various geographic locations etc.
  7. Customers based in high risk countries/jurisdictions or locations.
  8. Politically exposed persons (PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner;
  9. Non-resident customers and foreign nationals.
  10. Embassies/Consulates.
  11. Off-shore (foreign) corporation/business.
  12. Non face-to-face customers.
  13. High net worth individuals.
  14. Partnership Firms.
  15. Firms with ‘sleeping partners’.
  16. Walk-in-Customers.
  17. Companies having close family shareholding or beneficial ownership.
  18. Complex business ownership structures, which can make it easier to conceal underlying beneficiaries, where there is no legitimate commercial rationale.
  19. Shell companies which have no physical presence in the country in which it is incorporated. The existence simply of a local agent or low level staff does not constitute physical presence.
  20. Investment Management / Money Management Company/ Personal Investment Company.
  21. Accounts for “gatekeepers’ such as accountants, lawyers, or other professionals for their clients where the identity of the underlying client is not disclosed to the financial institution.
  22. Client Accounts managed by professional service providers such as law firms, accountants, agents, brokers, fund managers, trustees, custodians, etc
  23. Trusts, charities, NGO’s/NPOs (those operating on a “cross-border’ basis) unregulated clubs and organizations receiving donations (excluding NPOs/NGOs promoted by United Nations or its agencies).
  24. Money service Business: including seller of: Orders/ Travelers Checks/ Money Transmission /Check Cashing / Dealing or Exchange.
  25. Business accepting third party cheque (except supermarkets or retail stores that accept payroll cheque / cash pay roll cheque).
  26. Gambling/gaming including “junket Operators” arranging gambling tours.
  27. Dealers in high value or precious goods( e.g. jewel, gem and precious metals dealers, art and antique dealers and auction houses, estate agents and real estate brokers).
  28. Customers engaged in a business which is associated with higher levels of corruption (e.g. arms manufacturers, dealers and intermediaries).
  29. Customers engaged in industries that might relate to nuclear proliferation activities or explosives.
  30. Customers that may appear to be multilevel marketing companies etc.

Medium Risk Customers

  1. Non Bank Financial Institution
  2. Stockbrokerage
  3. Import/Export
  4. Gas Station
  5. Car/ Boat/ Plane Dealership
  6. Electronics(wholesale)
  7. Travel agency
  8. Used car sales
  9. Telemarketers
  10. Providers of telecommunications service, internet café, IDD call service, phone cards, phone center.
  11. Dot-com company or internet business
  12. Pawnshops
  13. Auctioneers
  14. Cash-intensive Businesses such as restaurants, retail shops, parking garages, fast food stores, movie theaters, etc.
  15. Sole Practitioners or Law firms (small, little known)
  16. Notaries (small, little known)
  17. Secretarial (small, little known)
  18. Accountants (small, little known)
  19. Venture capital companies

Low Risk Customers

  1. Individuals (Other than included in High and Medium Risk categories above)
  2. Government departments and Government owned Companies, regulatory and statutory bodies.
  3. Non Profit Organisations / Non Government Organisations promoted by United Nations or its agencies.
  4. All other categories of accounts / customer not falling under the above indicated High.