Client Relationship Termination is a procedural measure used by financial institutions (FIs) to end all formal dealings with a customer after confirming that the customer’s money laundering or terrorist financing risks cannot be managed within acceptable thresholds. Its primary AML/CFT purpose is to remove any remaining channels for illicit fund placement or layering that might persist when enhanced due diligence, ongoing monitoring, or other remedial actions fail to mitigate high risks. In practice, this control is typically enacted after repeated or escalating attempts—such as requesting additional information—remain unfulfilled or the customer’s overall risk profile becomes unmanageable. By ceasing the relationship, the FI both disrupts criminal misuse of its services and protects itself from further reputational or regulatory harm. Thorough internal review and senior management escalation generally precede the decision, ensuring that termination is applied only after other safeguards prove insufficient or the client remains non-responsive to key AML/CFT requirements.
Client Relationship Termination
Client Lifecycle Stages
“Refusal to onboard” is effectively early termination of the prospective relationship.
If high risk is discovered mid-process.
If the client’s behavior is too suspicious or unmanageable.
If the client’s behavior is too suspicious or unmanageable.
Mitigated Techniques
Terminate the relationship if customers consistently submit misleading or contradictory documentation for "gift" or "charitable" remittances, ignore repeated compliance requests, or continue circumventing established controls. This step removes ongoing exposure when remedial measures fail to rectify the high risk posed by disguised transaction practices.
If conclusive evidence of identity fraud is found, terminate the entire customer relationship and all associated accounts. This measure removes impersonators from the financial institution’s ecosystem, preserves compliance, and minimizes the risk of ongoing fraud.
- Terminate relationships with customers who are systematically laundering funds through underground gambling operations or consistently misrepresenting the source of gambling proceeds.
- This step prevents the institution from inadvertently facilitating ongoing criminal activity and is invoked when the AML risk remains unmanageable despite other controls.
Close accounts of customers who persistently engage in suspicious payment processing roles under fake employment, especially if they disregard warnings or fail to clarify discrepancies in their account usage.
Sever business relationships with customers who are confirmed to be repeatedly engaging in illicit commodity trade or who refuse to provide sufficient documentation explaining high-risk commodity transactions. This ensures the institution does not continue to facilitate illegal flows once evidence of wrongdoing is established.
Terminate relationships with customers conclusively identified as orchestrating lottery scams or repeatedly failing to provide valid proof of legitimate lottery operations. Once fraudulent conduct is confirmed, cease all services to protect victim funds and the institution’s integrity.
References
Visser, S. (2013). New money laundering typologies in the fight against money laundering by means of virtual currencies. Financial Intelligence Unit (FIU). http://walletexplorer.com
EBA. (2023). Guidelines on policies and controls for the effective management of money laundering and terrorist financing (ML/TF) risks when providing access to financial services. EBA. https://www.eba.europa.eu/
FATF (Financial Action Task Force). (2013, June). Politically exposed persons (Recommendations 12 and 22). FATF. http://www.fatf-gafi.org
Campa, J. M. (2022). Opinion of the European Banking Authority on 'de-risking' (EBA/REP/2022/01). European Banking Authority. https://eba.europa.eu