Not every business relationship deserves the same effort. The risk-based approach requires resources to go where the risk is. Enhanced due diligence is the consequence at the high end of the scale: additional enquiries, stricter approval and closer monitoring.
What triggers higher risk
The Swiss Anti-Money Laundering Act requires additional enquiries when a relationship or transaction appears unusual or there are indications of money laundering (Art. 6). Relationships with foreign politically exposed persons are always deemed higher risk. Other typical criteria include seat or residence in higher-risk countries, complex structures involving domiciliary companies, large asset values, unusual transaction patterns and negative media reports.
What is additionally clarified
At the centre are the source of wealth and the source of the funds brought in, the economic background and purpose of the relationship and the plausibility of larger transactions. Unlike in standard due diligence, the client’s word is not enough: material statements are supported by documents or reliable third-party sources, and adverse media screening is deepened.
Who approves
Accepting and continuing higher-risk relationships is not for the relationship manager alone. The applicable rules require approval by a senior function or management. In small organisations that is often the same person as the relationship manager — compensating controls are then needed, such as a four-eyes principle with an external compliance function.
Ongoing monitoring
EDD does not end at onboarding. Higher-risk relationships are reviewed more often, transactions are monitored more closely and the triggers for an extraordinary review are set lower. The risk classification itself must be confirmed regularly: someone leaving political office does not automatically stay in the highest risk category forever, and vice versa.
The common weakness
The most common weakness is not lack of effort but lack of traceability. Enquiries were made, but nobody can show what, with what result and who decided. A clean audit trail is therefore not an extra but part of the due diligence duty.