What does Nature and Purpose mean?

Obtaining certain information from customers about the nature and purpose of the relationship enables easier detection of patterns of behaviour that are inconsistent with your knowledge of the customers. Many jurisdictions legally require firms to understand the nature and purpose of the intended customer relationships. 

This includes understanding what the client is trying to achieve, how much business is expected, and how regular the interactions will be. If there is a material change in the nature and purpose of the relationship enhanced due diligence is required. 

The following are some examples of nature and purpose information you should consider when establishing a business relationship with a new customer. 

  • Purpose: Why has the customer decided to commence a relationship?
  • Sector Risk: What is the customer occupation or industry? 
  • Institutional Exposure: Is there exposure to shell companies, banks or unregulated institutions? 
  • Transactions: What is the customer's expected value, volume and velocity of transactions? 
  • Product Delivery: Does the customer expect to receive transactions from 3rd parties? 
  • Geography: Does the customer expect to transact in other jurisdictions?

Knowing the nature and purpose of the relationship helps manage risk and identify sales and service opportunities. By understanding the expected nature and purpose of the relationship we are able to refer back to compare how the customer has stated they intend to use the firm

Record keeping is important. This information should be retained and accessible to those needing to investigate suspicious activity. Avid AML retains this information in the customer profile for easy access and reference.

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