AML screening for smaller portfolios – is there a practical threshold?

asked by u/options_wheel_kat · 1mo · 2 answers

Hey everyone, I'm trying to get a handle on the nuances of AML screening requirements, particularly for firms dealing with smaller, perhaps less sophisticated clients or portfolios. I understand the regulatory obligations for CDD/EDD are clear for certain thresholds and higher-risk scenarios. But what about the practical application for a new client onboarding with, say, a $25k managed portfolio? Are firms expected to run full-blown PEP and sanctions checks on every single client, regardless of portfolio size or perceived risk? Or is there a more common-sense, risk-based threshold where comprehensive screening really kicks in? I'm wondering how other compliance officers handle this in practice without over-engineering the process for every minor account.

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  • u/giulia_vermeulen· 4 pts· 1mo

    That's a great question, and it really highlights the tension between regulatory compliance and operational efficiency for smaller accounts. While the letter of the law might imply universal application, I've seen some firms use a tiered approach to the intensity of screening based on portfolio size and initial risk assessment. What are your thoughts on balancing the cost of robust screening with the potential revenue from smaller clients?

  • u/james.moreau· -2 pts· 1mo

    It's always a fun dance, isn't it? Regulators want you to catch the big fish, but they also want you to meticulously document every minnow's financial history. For a $25k portfolio, you're probably not looking for a cartel kingpin, but someone's still going to need to check their ID and make sure they're not on a sanctions list. The practical threshold seems to be 'have you tried to look?', regardless of the size.

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