Risk Matrix /
Follow the below steps to determine the risk of the potential engagement and the level of client due diligence measures that need to be applied. A client can pose a high, standard or low risk and measures will either be simplified, standard or enhanced. To start collate the alphabetical categories that the engagement falls into (A, B, C, D).
CATEGORY A[1]If the answer is yes to any of the following questions:
Business Risk /
- Does the client’s ownership structure:
- Include a shell company?
- Include bearer shares or other factors which obscure the ownership?
- Include a Politically Exposed Person (PEP) or a High Profile Individual (HPI)?
- Facilitate unusually large transactions with no obvious economic or lawful purpose?
- Involve transportation (or goods etc.) across international boundaries (including hauliers, train operators and airlines)?
- Appear unusually complex and/or does it include entities or locations that cannot be explained commercially?
- Is the client's business
- Cash based?
- An unregistered charity or unregulated not-for-profit organisation?
- Industry risk:
- Art and/orantiques dealer
- Charity*
- Construction
- Dormant entity (without a bonafide commercial reason for its existence)
- Energy
- Financial services*
- Fossil fuels and distribution
- Gaming, gambling or betting
- Journalistsor authors with a significant overseas income
- Investment companies* (not holding or property investment companies)
- Manufacturing of machine parts
- Metals, precious metals and gemstones
- Money service business
- Military weapons and equipment
- Mining
- Overseas landlords
- Political
- Real Estate (overseas)
- Wholesale & distribution (overseas based and/or connection)
*If the entity is regulated by a regulator in section D, and there are no other risks from table A or B, this is considered sufficient to mitigate the industry risk and simplified documentation may be gathered.
Service Risk /
- Co Secretarial
- Capital and share reorganisation**
- Company formation**
- Company reorganisations**
- Strike off and company restoration**
- Insolvency
- Administration (overseas)
- Administrative receivership (overseas)
- Bankruptcy (overseas)
- Company voluntary arrangement (overseas)
- Compulsory liquidation (overseas)
- Creditors' voluntary liquidation (overseas)
- Individual voluntary arrangement (overseas)
- Informal solutions (overseas)
- Members voluntary liquidation
- Personal insolvency (overseas)
- Scheme of arrangement (overseas)
- Tax Investigations:
- COP 8 (Specialist Investigations – SI)
- COP 9 (Civil Investigation of Fraud – CIF)
- Criminal Investigations
- Hidden Economy Team investigations
- Tax Mitigation Schemes
- VAT investigations
- Voluntary disclosure
- Trust
- Wills and probate
- As part of this engagement are we likely to:
- Hold client assets?
- Receive client money?
- Receive our fee payment from a third party or unknown source?
** A standard risk rating would apply if these services will be provided to an existing client, as long as there is a credible business reason, this does not include transactions that include a third party who is not a client.
Other Risk /
- Is the direct client a Politically Exposed Person (PEP) or a High Profile Individual (HPI)*?
- Do we know or suspect that the client or a person in the ownership and control structure is or has been involved in money laundering/terrorist financing?
- Does the client or individual/entity within the group appear on a sanctions list?
- Do we have any doubts about the information provided from the client?
- In light of your knowledge of the client and the engagement, are there any other factors that present a higher risk of money laundering or terrorist financing to the Firm?
If the answer is no to the following question:
- Have we had face to face contact with the client?
CATEGORY B or C[2]
Country Risk / Below is a list of countries that pose a standard risk. Please consider all of the ‘countries associated’ with the potential client. If all of the ‘countries associated’ appear in the below list category B will apply. If the ‘countries associated’ do not all appear category C will apply.
By definition ‘countries associated’ includes country of incorporation, countries of operation (for the direct client and group companies) and the nationalities and/or place of birth (if differs) for all connected individuals.
Jurisdiction Inside the EU
-Austria
-Belgium
-Bulgaria
-Croatia
-Czech Republic
-Cyprus
-Denmark
-Estonia
-Finland / -France
-Germany
-Gibraltar
-Hungary
-Iceland
-Ireland
-Lithuania
-Luxembourg
-Malta
-Netherlands / -Norway
-Poland
-Portugal
-Romania
-Slovakia
-Slovenia
-Spain
-Sweden
-United Kingdom
Jurisdiction Outside the EU
-Australia
-Canada
-Chile
-Israel / -Japan
-New Zealand
-Qatar
-Singapore / -Switzerland
-United States
-Uruguay
CATEGORY D
Regulatory Risk / Is the direct client regulated by any of the following:
- Charities Commission
- Charities Commission (EU equivalent)
- Pensions Regulator
- Pensions Regulator (EU equivalent)
- FCA/PRA
- FCA/PRA (EU equivalent)
- SRA
- SRA (EU equivalent)
Is the direct client or 100% parent company regulated by any of the following:
- London Stock Exchange
- Recognised Stock Exchange (see appendix 3)
Follow the below table to understand how to apply the CDD measures as per risk assessment.
CATEGORIES / AML RISK RATING / CDD MEASURESA + B / High / Enhanced
A + C / High / Enhanced
A + D / High / Enhanced
B + D / Low / Simplified
C + D / High / Enhanced
B / Standard / Standard
C / High / Enhanced
A + B + D / High / Enhanced
A + C + D / High / Enhanced
J
Revert to the client due diligence guidance for a full list of required documentation according to company type.
Please note the difference between standard and enhanced is purely knowing the source of funds/wealth[3].
[1]Any factors that give rise to a positive confirmation in this section should be detailed in the client due diligence overview form.
[2]All high risk countries should be detailed in the client due diligence overview form. The full list of countries with the associated risk rating can be found in appendix 2.
[3]This involves a conversation with the client and a file note. It does not, in most circumstances, involve gathering supporting documents.