The gut feeling: an important tool in compliance

Most people working with AML compliance will recognise the feeling when your gut feeling just doesn’t sit right.

On the surface, everything appears to be in order: the customer has been identified, documentation has been collected, and transactions follow the expected pattern. And yet, you are left with a sense that something is not quite right – even if it is difficult to pinpoint exactly what. Still, the gut feeling is there.

In many organisations, no action is taken on feelings like this. How do you fit something so intangible into a regulatory framework known for being detailed, documentation-heavy and legally complex?

The answer is: better than you might think.

Isn’t a gut feeling at odds with AML legislation?

You might think that your work cannot be based on gut feelings – and to some extent, you would be right. But that does not mean your gut feeling is irrelevant. AML legislation does not operate with concepts such as “proof” or “certain knowledge” when it comes to the duty to act. Instead, it uses terms like “suspicion”, “knowledge” and “reasonable grounds to suspect”.

These concepts are inherently imprecise – and that is precisely the point. Money laundering and terrorist financing rarely present themselves in a clear or obvious way. More often, it is the accumulation of small issues that raises concern: incomplete answers, inconsistent information or unusual behaviour.

This is where the gut feeling comes into play. Not as a legal basis in itself, but as a signal that something may warrant closer examination.

The duty to investigate: when something feels off

For many organisations, the duty to investigate is the most difficult obligation to translate into clear processes. That is because it is not always triggered by something concrete or measurable that can easily be written into procedures.

It may arise in situations where:

• documentation is missing without a clear explanation

   

• information provided by the customer changes over time

   

• transactions are lawful on paper but do not make commercial sense

Individually, none of these factors are necessarily problematic. But put together – or when they recur – they can give rise to that familiar feeling that something is not quite as it should be.

From a legal perspective, this often constitutes reasonable grounds to suspect money laundering or terrorist financing. At that point, the duty to investigate arises. This does not mean you must immediately draw conclusions. Rather, the duty to investigate requires you to ask the right questions:

• Are we missing information we should have?

   

• Can the customer explain the situation in a way that makes sense?

   

• Does the explanation align with what we already know?

It is important to remember: investigating is not the same as suspecting. It is about taking your responsibility for AML seriously.

The duty to record: from feeling to documentation

Once you have acted on your gut feeling and carried out an investigation, you must consider what needs to be documented, and how. One thing is crucial here: you should not simply record your gut feeling.

Instead, you must document:

• what triggered the investigation

   

• what actions you took

   

• and what conclusion you reached

The duty to record is about demonstrating that you have acted objectively and systematically, even in cases where the investigation leads you to take no further action.

In practice, this means translating “soft” observations into concrete facts:

• “The customer’s answers were unclear” becomes: the customer was unable to explain the purpose of the transaction

   

• “Something felt off” becomes: inconsistencies were identified between the stated business model and actual payment flows

Good record-keeping is not about writing a lot – it is about writing clearly and descriptively.

The duty to report: when a feeling becomes suspicion

If the investigation does not alleviate your concern – or if it confirms it – you may reach the point where a genuine suspicion exists. This is where the duty to report arises.

For many, this is the most sensitive step in the process. But a report is not an accusation. It is a professional assessment that obliged entities are required to make, after which the authorities take over the evaluation.

When you submit a report, you are not determining whether a crime has been committed. You are simply documenting that you have acted correctly and in a timely manner – and, at the same time, protecting your organisation from potential criminal activity.

Gut feeling requires structure

It can be tempting to think that good compliance is about having the courage to act on your gut feeling. In reality, it is far more about structure and about having clear policies and procedures in place.

This ensures that it is clear when a customer relationship should be investigated further, that documentation becomes a natural part of your AML work, and that reporting is integrated into your workflows.

Your gut feeling should not stand alone. Instead, it should act as the first clear signal in a process where the next steps are always clearly defined by your procedures.

Trust the feeling – and document the action

A gut feeling is not the answer to AML compliance. But it is often the starting point for asking the right questions and a tangible instinct we all recognise from everyday life.

If you do react, investigate and document your considerations, you are doing exactly what the AML legislation expects of you – even if it all started with a simple sense that something wasn’t quite right.