Case snapshot: a clean file that didn’t add up
The origin oversight: when paper looks perfect but the story doesn’t
Max was reviewing a property purchase flagged during a post-transaction quality check. The client—a foreign national residing in Belgium—had bought an apartment outright for €320,000. On paper, everything was there: ID, proof of address, six months of bank statements. The statements showed several credits from multiple East Asian accounts, cleanly formatted and professionally presented. It looked complete.
Ella caught the gap first. “These aren’t wages,” she said. “No salary inflows, no pattern—just incoming transfers from unrelated accounts. And no explanation of who sent them.”
Max sighed. “We asked for bank statements, and they gave them. But we never asked what those credits were.”
Luc reviewed the profile. No declared business activity. No loan documents. No support declaration. “The file shows effort not understanding,” he said. “This isn’t due diligence.”
Regulators don’t ask firms to gather documents. They expect them to interpret them. The risk lives in unexamined data.
Max issued a remediation directive: every case involving foreign inflows must now include a source-of-funds rationale, explicitly linking narrative to documentation. Compliance would sign off only when the story and the statements aligned.
Regulatory lens: why EDD requires interpretation, not just documentation
Article 34 of the AML Regulation (Regulation (EU) 2024/1624) establishes that when higher risk is identified, obliged entities must apply enhanced due diligence — including obtaining and assessing additional information on the customer’s source of funds and source of wealth. The assessment must ensure these are consistent with the customer’s risk profile and the purpose and intended nature of the business relationship or transaction.
It frames EDD as an evaluative process, not a documentary exercise. Passive collection of statements or declarations without checking whether they align with expected financial behavior fails both the regulatory test and the intent of the Article.
Final thought: evidence without context is not due diligence
Evidence without understanding is an illusion. A bank statement, tax record, or invoice has no value unless tested against logic, profile, and purpose. Source-of-Funds checks are not document hunts; they are credibility assessments. The goal is alignment — between what’s declared, what’s documented, and what’s plausible. Collect as required, question more. Compliance exists to expose truth, not to archive paper.
