Short answer
Understanding the purpose and intended nature of the business relationship forms part of customer due diligence under UK guidance, and firms are expected to hold and be able to evidence that understanding. The FCA's April 2026 review of customer due diligence processes and controls listed failure to record purpose and intended nature among the weaknesses it observed, so a record that exists but cannot be tested is a common gap.
What the rules and guidance say
HMRC's guidance for supervised businesses describes customer due diligence as including customer and beneficial owner checks where applicable, understanding ownership and control, understanding the purpose and intended nature of the business relationship, ongoing monitoring, records and updating on change. The FCA Financial Crime Guide sets out corresponding expectations for firms the FCA supervises, and the Money Laundering Regulations 2017 provide the statutory framework.
The FCA's April 2026 findings described observed weaknesses including failure to record purpose and intended nature, insufficient evidence of enhanced due diligence, insufficient detail on periodic and event-driven reviews, and weak independent assurance and version control. Those observations relate to the firms reviewed; the detail expected of any particular firm depends on its sector, supervisor and risk profile. This page is general information, not legal or compliance advice.
Practical implications
- Capture the record as structured data wherever a downstream control will use it, with a short narrative alongside rather than instead.
- Include expected products, rationale, volumes and values as ranges, frequency, counterparty types, jurisdictions, expected source of funds and channels.
- Scale the depth to the risk rather than applying one template to the whole book.
- Version and timestamp the record so the expectation in force at a past date can be reproduced.
- Connect it to transaction monitoring and to the customer risk assessment, so it functions as a control rather than as documentation.
Agora practitioner interpretation
Our working test is whether a monitoring analyst could decide, from the record alone, whether a given transaction is consistent with what the firm expected. If they cannot, the field is filled in but the control is absent, and that is the condition supervisory reviews tend to find.
The fuller treatment, including a field-by-field capture model, is in purpose and intended nature of the business relationship.
Primary sources
- HMRC AMLG11300, customer due diligence (updated 16 July 2026)
- FCA, Firms' customer due diligence processes and controls: our findings (8 April 2026)
- FCA Financial Crime Guide, chapter 3
- The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017
Frequently asked questions
Is a one-line purpose statement sufficient?
Rarely. The test that matters in practice is whether the record is specific enough for monitoring to distinguish expected from unexpected activity and for a reviewer to test the conclusion. Boilerplate wording repeated across many files fails both.
Does the level of detail vary by risk?
Yes. A standard low-risk relationship can be captured through defined option sets. Higher-risk and complex relationships warrant expected values, frequency, counterparty types, jurisdictions and a short narrative rationale.
Should the record be updated after onboarding?
Yes. Where activity diverges materially from the recorded expectation and the divergence is explained, the explanation should update the customer record rather than remaining only in an alert disposition.
Related resources
Next step
Capturing purpose as structured data
See nature of business and expected activity feeding risk assessment and monitoring in one platform.