Products and Services
Risk varies by product, not by customer alone
Product knowledge matters because the same customer carries different risk depending on what they buy. Candidates should understand the risk profiles of: correspondent banking (high risk; requires EDD, understanding of the respondent's controls), private banking (high-value, relationship-driven, source-of-wealth questions), wire transfers (originator and beneficiary information must travel with the payment - the "travel rule"), stored-value and prepaid instruments (anonymity risk), trade finance (dual-use goods, over- and under-invoicing), and virtual assets (pseudonymity, cross-border speed, mixers).
Concepts to master
- Nested and payable-through accounts in correspondent banking are elevated risks.
- Trade-based money laundering techniques: over-invoicing, multiple invoicing, falsely described goods, and carousel transactions.
- New products: firms should assess money-laundering risk before launch, not after.
- Payout and remittance corridors carry jurisdiction risk that changes with sanctions and conflict.
Traps
Assuming a low-risk customer makes every product low risk. Assuming a domestic transfer is automatically low risk when the underlying funds are foreign. Confusing a correspondent relationship with a normal commercial account.
Worked example
A customer requests a series of payments for "consultancy" to a jurisdiction with no obvious link to the business, with invoices that describe services vaguely and amounts just under internal review thresholds. The product (international wire) plus the pattern (no economic rationale, threshold avoidance) should drive an EDD review and possible escalation, even if the customer's KYC file is complete.
Rule of thumb
Ask two questions of any product: how easily can value move without a clear audit trail, and how easily can the counterparty be identified?