Definition

Periodic Review

A periodic review refers to the scheduled assessment of a client's financial information, risk profile, and account activities. The periodicity is primarily risk-driven and the reviews are essential for compliance with AML, CFT and similar regulations. Depending on the client's risk profile, periodic reviews can be made multiple times a year, annually, or even every two to seven years. Periodic reviews stand in contrast to ad-hoc reviews that are triggered by (i) external events, such as background checks, transactions over a certain threshold, or (ii) by the bank, e.g. reviewing all accounts that have a connection to a specific country, or (iii) by the client, if they for example change their address to a higher risk domicile.

Synonyms

Ongoing review, risk re-evaluation

Acronyms

Examples

A bank may perform a periodic review of their medium-risk relationships on a yearly basis in order to check whether client data and their associated risk-levels are still accurate. If suspicious behavior is detected, the bank will perform a more thorough investigation.

For example, if the client suddenly makes a very large transaction or started making transfers to high-risk countries. What triggers a periodic review will depend on the respective jurisdiction and the bank’s risk appetite.

FAQ

Why do banks perform periodic reviews?

Periodic reviews are necessary for staying compliant with Anti-Money Laundering, Combating the Financing of Terrorism and similar regulations. They also protect the bank from taking on preventable risk and ensure that customer data is up to date.

How often are periodic reviews performed?

How often a periodic review is performed varies across different banks and clients as it depends on the bank’s risk model as well as the individual’s perceived risk level. For example, individuals who have suddenly started making large deposits to overseas accounts may be considered a high-risk customer and therefore be reviewed one or more times a year. On the other hand, individuals that show no suspicious activity and a consistent transaction history may be considered low-risk and therefore only be reviewed every few years.

What information is required during a periodic review?

Banks will typically request up to date identification documents, financial statements and information about the ownership structure of legal entities. They will also request added information regarding any and all unusual or suspicious transactions.