When should a financial institution update its customer risk profiles?

Financial institutions should update their customer risk profiles whenever there are significant changes in the customer's activities, structure, or risk factors. This practice is vital to maintaining an effective anti-money laundering (AML) program, which requires institutions to have up-to-date information to assess, monitor, and mitigate risks associated with their clients.

By regularly updating risk profiles in response to changes—such as a shift in a customer's transaction behavior, change in ownership structure, or emerging risk factors—banks can more accurately identify potential risks related to money laundering or financial fraud. This proactive approach enables timely adjustments to customer monitoring and enhances the institution's ability to stay compliant with the Bank Secrecy Act (BSA) and other applicable regulations.

Adopting a reactive approach, such as only reviewing profiles during annual reviews or when requested by the customer, would leave the institution vulnerable to emerging risks. Additionally, updating profiles specifically before launching new financial products, while potentially important, may not encompass the broader need for continuous assessment that reflects ongoing customer activities and their associated risks.