There are a series of questions that firms should ask when onboarding new clients: the nature of the business that the client is involved in and their activities, their source of funds, their ultimate beneficial ownership structure, their ethical involvement and values such as ESG and diversity, equity, and inclusion (DEI), a financial check to ensure that they can pay their their bills and that they’re able to manage their financial affairs.
The series of information collected at the outset is extremely important because that informs that reputational element and also a series of downstream processes that are very important in terms of mitigating for a firm.
When a firm onboards a high or higher risk client, it can be beneficial to consider the additional levels of work involved in conducting those checks at the outset and on an ongoing basis. It’s also important to consider the commercial impacts. So, obviously, the increased level of exposure that the firm is taking on in accepting high risk clients may open up to the opportunity of considering additional fee levels or some form of commercial decision making that pays attention to the fact that that is is a higher risk claim for the firm as a whole.