Risk Rating Reasoning Examples - copy and Paste Examples

In the Borrower AML Risk Assessment Conclusion section in Velocity, you must clearly explain why you assigned the borrower a High, Medium, or Low risk rating. This means you should understand the reasoning behind each rating and be able to justify why it applies to your specific client.

Simply putting "Canadian Citizen" or "Good Credit" is not enough. Both you and I know many Canadian Citizens with good credit who could absolutely be involved in Money Laundering. Be Aware:

The Risk Assessment is an INTERNAL document and should never be shared with the client. Sharing this with the client violates the PCMLTFA and ABW Policies and Procedures.

The below lists provides practical, easy-to-use examples that you can copy and paste in to the text box where  appropriate. Use all statements that apply to your client’s situation, adjust the wording as needed to accurately reflect their specific circumstances or create your own to use. This is just a starting point .

Remember, you need to tell why you rated it as you did. If a medium or high was given please write  what enhanced due diligence steps you took to mitigate the risks and why ou are still ok proceeding with the file. Tell the story like you are talking to a FINTRAC auditor or a Lawyer, because the next person that's likely to read it will be one.

Copy and paste ALL which apply to your client based on the situation.

LOW RISK – Justification Examples

• No positive sanctions screening results identified
• Borrower is not a PEP, HIO, or known close associate/family member
• No adverse media identified
• Down payment/equity proportionate to financial profile and fully supported
• Employment and income verified; no inconsistencies identified
• Client not involved in high-risk or cash-intensive industries
• No third-party involvement identified
• Source of funds fully documented and traceable through Canadian financial institutions
• Gifted funds supported with signed gift letter and proof of deposit
• Documentation complete, consistent, and free of alteration concerns
• Property value supported by market data and reasonable explanation
• Client cooperative and transparent throughout verification process

MEDIUM RISK – Justification Examples

• Sanctions screening false positive confirmed and documented
• Domestic PEP identified; enhanced due diligence completed
• Adverse media identified but reasonably mitigated with explanation and documentation
• Down payment disproportionate to profile but fully traced and supported after additional review
• Client operates in higher-risk or cash-influenced industry; income verified and reasonable
• Third party identified and verified; involvement documented and approved
• Large deposits identified; fully traced and explained
• Virtual/digital currency used; transaction history verified and traceable
• Income discrepancies identified but reconciled with updated documentation
• Property pricing concerns supported by appraisal or comparables
• Initial client reluctance or urgency reasonably explained and documented
• Client has historical ties to high-risk jurisdictions (NOT an automatic High Risk Indicator)
  

HIGH RISK – Justification Examples

• Positive sanctions match identified
• Foreign PEP identified
• Active adverse media with confirmed legal, regulatory, or reputational concerns
• Down payment disproportionate and source not adequately supported
• High-risk or cash-intensive industry with insufficient financial transparency
• Undisclosed or unclear third-party involvement
• Large deposits untraceable or unsupported
• Funds sourced from foreign or higher-risk jurisdictions without satisfactory explanation
• Use of shell companies or offshore entities obscuring beneficial ownership
• Beneficial ownership not identified or not verifiable
• Income discrepancies unresolved
• Signs of document alteration or suspected fraud
• Conflicts with credit bureau or third-party data unresolved
• Virtual/digital currency use unverifiable
• Client secrecy persists regarding source of funds
• Attempt to bypass compliance controls or standard verification processes
• Escalation required for suspicious transaction reporting
• There are multiple medium or lower risk items in the file

Job related reasoning responses. 

• Employment verified through paystub(s) and/or employment letter
• Employment/income supported by T4 and/or CRA Notice of Assessment
• Payroll deposits visible in bank statements and consistent with stated employer
• Employer appears legitimate and verifiable (business address/contact/online presence)
• Client’s occupation is standard salaried/hourly employment (not cash-intensive)
• Income level is reasonable for the stated occupation and aligns with documentation
• Employment appears stable (consistent tenure and regular pay frequency)
• No inconsistencies between application details, ID, and employment documents
• No indicators of document alteration or unverifiable employer information
• No involvement in high-risk industries (cash-heavy, MSB/crypto, unregulated lending, etc.)

Source of funds (SOF) and source of wealth (SOW)

• Broker reviewed and documented the client’s stated source of wealth
• Source of wealth is clear, reasonable, and consistent with the client’s employment/business history
• Broker reviewed supporting documentation confirming source of funds (e.g., bank statements, sale proceeds, savings)
• Funds originate from legitimate Canadian sources and regulated financial institutions
• Transaction funds align with the client’s income level, assets, and overall profile
• No use of third-party funds or unexplained contributors identified
• No complex ownership structures, trusts, or layered fund movements involved
• No large or unusual deposits inconsistent with the stated source of funds
• Funds movement is straightforward and traceable
• No indicators of high-risk or suspicious activity identified during review