Director of CT Group, David Phillips, shares his experiences on the treatment of clients classified as ‘high risk’

Geopolitical volatility is keeping us all on our toes. We are seeing political fragmentation and polarisation in the West, a tightening affiliation of authoritarian regimes including Russia, Iran, China and North Korea, and conflicts involving multiple parties in Ukraine, Gaza, and Sudan to name a few. That’s before we even mention tariffs.

And with that comes a long list of risks. Sanctions risks have been top of the agenda since the conflict in Ukraine started in February 2022. Companies have also become wary of issues in their supply chain, especially violations of labour laws or dealing with conflict minerals. And rightly so – severe penalties have included seizure of assets, revocation of licences, fines, and even imprisonment. Regulation continues to tighten, with the UK’s Economic Crime and Corporate Transparency Act (ECCTA) coming into force in September 2025, which will hold organisations criminally liable in certain circumstances for failing to prevent fraud. It is not something that companies can afford to get wrong.

However, the easy option is to avoid as much risk as possible by applying broad brush assumptions. We have seen wealth managers exit entire parts of continents (not even specific countries) because of perceived client risks, and numerous financial institutions discontinuing relationships after the emergence of an adverse media article, a legal case, a complex corporate structure, or sometimes simply because of a client’s nationality despite having a relationship with that institution for a number of years.

This reactive approach, while understandable in a climate of heightened scrutiny, often fails to distinguish between genuine risk and superficial red flags. A blanket risk-avoidance strategy may reduce immediate exposure, but it can also lead to missed opportunities, unnecessary financial losses, and reputational damage for institutions that disengage hastily. The reality is that risk cannot be eliminated entirely. Instead, it must be managed intelligently, using thorough due diligence and context-driven assessment rather than reliance on assumptions and rigid categorisation.

Challenging Assumptions

The principal reason for such an approach is that companies are classifying their clients into broad categories without considering each of them on their merits. There is of course good reason to apply certain criteria and use technology especially for high volumes of data. However, applying highly subjective, sometimes even discriminatory, rules is neither fair nor commercially smart.

Those of us who work in the private client space are only too familiar with the intricacies and peculiarities of high-net-worth individuals, family offices, and privately owned companies. But hopefully we are all open-minded enough to recognise that each individual and each company needs to be assessed on their own merit, regardless of where or when they generated their wealth, or what structure they have chosen to put in place to protect or build their assets. How they accumulated their wealth is what matters.

The real question we need to ask is how well do I know this specific client? Do I know which jurisdictions and sectors they operate in? And which companies within those jurisdictions they have contractual relationships with? Have I reassured myself that they are not involved in illicit activity or are exposed – inadvertently or not – to a sanctioned entity? Am I comfortable with their source of wealth? Am I aware of the facts behind their connections with a state-owned entity? Have I interrogated the credibility of a media article mentioning the client, and cross-checked it with other data sources? Do I really understand the risk?

What private clients can do

Having spent many years helping clients that are perceived as ‘high risk’ explain themselves to a variety of counterparties, we have seen their frustration in being pigeon-holed into broad categories. Equally, several of us have sat on the other side of the fence in compliance and risk management departments of financial institutions, and understand the costs of compliance and the consequences of making a mistake.

An onboarding process should be an interrogation of the facts behind a client’s source of wealth and a deep examination of the context in which they accumulated their wealth and the reasons for which they may be perceived as ‘high risk’. It should not simply be a process whereby clients are put into categories. Without fully understanding the facts, the rejection of a client should be questioned as much as the approval of an application.

As with many walks of life, it is the clients who are ‘unusual’ that often pay the price, largely because it requires some effort to understand them. Ironically, that effort can be hugely rewarding – financially, socially, and intellectually. Many of them are entrepreneurs who founded and grew businesses in nascent economies and extremely challenging environments around the world, where others failed. Their stories are unique. And their success should be lauded.

And while having unique careers, there is a growing number of entrepreneurs across the Middle East, Asia, Eastern Europe, South America, and Africa that need help in being understood by the West, as they seek to unlock the next stage of growth or bring their products and services to international markets.

We support many of these individuals and businesses achieve their objectives through building robust relationships with financial institutions, business partners, and other counterparties. By forensically analysing business records and other documents, and conducting in-depth research to fully understand the context, we deliver fact-based reports for businesses and individuals to explain their history and origins of wealth.