/kyc-risk-rating

name: kyc-risk-rating
description: >
  Activate for: KYC risk rating, customer risk classification, AML risk score,
  customer risk assessment, high-risk customer, risk-based approach, risk rating,
  customer due diligence risk score, PEP risk, geographic risk, product risk,
  customer risk categories.
  NOT for: transaction monitoring alerts (use aml-typologies), SAR/STR drafting
  (use aml-sar-drafting), sanctions screening (use sanctions-screening).
metadata:
  version: "1.0"
  author: "Panaversity — The AI Agent Factory"
  standard: "FATF Recommendation 1 (Risk-Based Approach), Recommendation 10 (CDD)"

RISK-BASED APPROACH PRINCIPLE

The FATF Risk-Based Approach requires that AML/CFT measures be proportionate to the risks identified. Higher-risk customers receive Enhanced Due Diligence (EDD); lower-risk customers may receive Simplified Due Diligence (SDD) in some cases. Every customer must be assigned a risk rating and the rating must be reviewed periodically.

RISK SCORING FRAMEWORK — FOUR DIMENSIONS

Dimension 1: Customer Type Risk

| Customer Category | Risk Score | | ------------------------------------------------------------- | ------------------------ | | Listed company (major exchange) | 1 — Low | | Regulated financial institution (home jurisdiction) | 2 — Low | | Domestic corporate (private, no PEP links) | 3 — Medium | | High net worth individual | 3 — Medium | | Non-profit organisation / charity | 4 — Medium-High | | Foreign private company | 4 — Medium-High | | Offshore structure (Cayman, BVI, Panama) | 5 — High | | Trust or foundation (complex beneficiary structure) | 5 — High | | PEP individual (Tier 1 — foreign) | 5 — High (mandatory EDD) | | Cash-intensive business (jeweller, currency exchange, casino) | 5 — High |

Dimension 2: Geographic Risk

| Geography | Risk Score | | -------------------------------------------- | -------------- | | FATF member, low TI-CPI risk | 1 — Low | | FATF member, moderate TI-CPI risk | 2 — Low-Medium | | FATF under enhanced follow-up (grey list) | 4 — High | | FATF blacklisted jurisdiction | 5 — Very High | | Non-FATF jurisdiction with strong AML regime | 3 — Medium | | Non-FATF jurisdiction with weak AML regime | 4 — High |

Check current FATF grey/black list at fatf-gafi.org — updated three times per year. TI Corruption Perceptions Index (CPI): scores below 40/100 indicate high corruption risk.

Dimension 3: Product / Service Risk

| Product / Service | Risk Score | | ----------------------------------------- | --------------- | | Basic current account (domestic customer) | 1 — Low | | Fixed-term savings/deposit | 1 — Low | | Retail mortgage | 2 — Low-Medium | | Business current account | 3 — Medium | | International wire transfers | 4 — Medium-High | | Private banking / wealth management | 4 — Medium-High | | Correspondent banking | 5 — High | | Trade finance | 5 — High | | Cryptocurrency-related services | 5 — High | | Cash-heavy transactions | 5 — High |

Dimension 4: Relationship / Behavioural Risk

| Indicator | Risk Score | | --------------------------------------------------------- | --------------- | | Long-standing customer, consistent behaviour | 1 — Low | | New customer, no prior relationship | 3 — Medium | | Complex or inconsistent business explanation | 4 — Medium-High | | Reluctance to provide CDD documentation | 5 — High | | Third-party introduction with no independent verification | 4 — Medium-High | | Adverse media (unverified) | 4 — Medium-High | | Adverse media (verified / criminal conviction) | 5 — High | | Prior SAR on this customer (bank or other FI) | 5 — High |

OVERALL RISK RATING CALCULATION

Composite score = Weighted average of four dimension scores: Customer type: 35% Geographic: 30% Product/service: 20% Relationship/behavioural: 15%

| Composite Score | Overall Risk Rating | CDD Level | Monitoring Frequency | | --------------- | ------------------- | ----------------------------------------- | -------------------- | | 1.0 - 2.0 | Low | Standard CDD | Every 5 years | | 2.1 - 3.0 | Medium | Standard CDD | Every 3 years | | 3.1 - 4.0 | High | Enhanced CDD | Annually | | 4.1 - 5.0 | Very High | Enhanced CDD + Senior Management Approval | 6-monthly or more |

Scoring Methodology Detail

The weighted average approach is the most common, but banks must consider:

• Whether to use the highest single dimension score as a floor
• Whether to apply non-linear scaling (e.g., any dimension at 5 forces overall High)
• Some regulators require that certain triggers override the composite score entirely

Example calculation: Customer type: Foreign private company = 4 Geographic: FATF grey list jurisdiction = 4 Product: Correspondent banking = 5 Behavioural: New customer = 3 Composite = (4 x 0.35) + (4 x 0.30) + (5 x 0.20) + (3 x