This tool implements a risk-based approach to client due diligence consistent with the Money Laundering Regulations 2017, FCA SYSC 6.3, and FATF Recommendations. It is a decision-support aid — outputs are advisory and must be reviewed by a qualified compliance professional.
1. Scoring Architecture
The tool assesses client risk across six weighted sections. Each section contains scored questions. An analyst selects the most accurate answer for each question; the score for that answer is added to the raw total.
Identity & Structure
Beneficial ownership clarity, entity complexity, number of UBOs
Geographic Risk
Country of residence, nationality, birth, tax residency, SoW/SoF origin
PEP & Sanctions
PEP status, tier, screening result, associated parties
Source of Wealth / Funds
SoW type, SoF alignment, corroboration status, wealth consistency
Product & Transaction
Investment size, product type, transaction complexity
Adverse Media
Finding severity, relevance, resolution status
2. Normalisation
The raw score is normalised to a 0–100 scale using a dual-denominator method. The denominator reflects the actual client being assessed: when no High Risk Business Activity applies (HRBA = Not Applicable), the maximum is calculated from Sections 1–5 only. When one or more HRBA categories are selected, the relevant HRBA worst-case scores are added to the denominator. This ensures the scale is calibrated against the population the client actually belongs to, rather than a theoretical maximum that includes risk categories the client can never be scored against.
Band thresholds are calibrated to the realistic score distribution for the target client population (boutique wealth management, private banking, family office). In practice, Band C is reached almost exclusively via Auto-EDD triggers rather than score accumulation alone — the score-based Band C threshold exists as a structural safeguard for extreme multi-factor accumulation without a single categorical trigger. The normalised score and band thresholds are not displayed to analysts to prevent score-targeting; they are available to Senior and Manager users via the governance settings and review panel.
Normalised Score = (Raw Score ÷ Dynamic Maximum) × 100, capped at 100 · Dynamic Maximum = Sections 1–5 worst-case (+ selected HRBA category worst-case if HRBA applies)
3. Rating Bands
A
Low Risk
Score 0–
SDD · 5-year review
B
Medium Risk
Score –
SDD/EDD · 3-year review
C
High Risk
Score –100 or EDD trigger
EDD · Annual review
4. Auto-EDD Triggers
Certain risk factors trigger automatic escalation to EDD regardless of the overall normalised score. These are non-overridable at the analyst level — a Compliance Officer override with documented rationale is required to downgrade.
Trigger conditions include — per-question Auto-EDD flags (question-level, see questionnaire) · SPV/shell company with complex beneficial ownership (combined trigger) · foreign or international PEP combined with high-risk Source of Wealth (combined trigger) · Risk 3 jurisdiction combined with elevated business activity score (combined trigger) · unregulated introducer · unregulated crypto exchange as SoW · crypto exchange with unknown regulatory status · crypto exchange in Risk 3+ jurisdiction · material adverse media finding.
5. Minimum-B Conditions
Certain factors prevent a Low Risk (A) rating regardless of score. These include — per-question Minimum-B flags (question-level) · trust or structured partnership with complex beneficial ownership (combined trigger) · Risk 4 nationality. The client receives at minimum a Band B rating with SDD, or EDD where the firm's B→EDD policy setting is active.
6. Regulatory Basis
Money Laundering Regulations 2017 (MLR 2017) — Regs 18, 19, 28, 33, 35 ·
FCA SYSC 6.3 — Systems and controls for financial crime ·
JMLSG Guidance Part I — Risk-based approach ·
FATF Recommendations 10, 12 — CDD and PEP requirements ·
Economic Crime (Transparency and Enforcement) Act 2022
7. Reasonable Procedures
This tool is designed to form part of a firm's "reasonable procedures" under Section 330 of the Proceeds of Crime Act 2002 (POCA) and Regulation 19 of MLR 2017. Reasonable procedures require firms to have:
a) A documented and consistently applied risk assessment methodology — satisfied by this scoring tool and its section-weighted questionnaire.
b) A systematic and evidenced process for identifying, assessing, and mitigating ML/TF risk at client level — satisfied by the pre-assessment checklist, structured questionnaire, and audit-trail output.
c) Clear escalation pathways for higher-risk clients — satisfied by the Auto-EDD trigger mechanism, EDD question prompts, and Compliance Officer override / sign-off workflow.
d) Documented senior management approval for high-risk relationships — satisfied by the Band C senior management sign-off capture.
e) A periodic review process proportionate to risk — satisfied by the review frequency assigned at output (1-year, 3-year, or 5-year) and the trigger events checklist.
This tool produces a timestamped, audit-ready record for each assessment. Firms remain responsible for ensuring that their overall AML/CTF framework — including training, governance, policies, and independent oversight — meets the full requirements of MLR 2017, FCA SYSC 6, and applicable JMLSG guidance.
Veridex Advisory — This methodology note is provided for transparency and auditability. The scoring weights and band thresholds have been calibrated against MLR 2017 requirements and JMLSG guidance for wealth management firms. Configurable band thresholds and section weight adjustments are available under a licensed implementation. · veridexadvisory.com