Purpose and Intended Nature of a Business Relationship or Transaction under Art. 25 AMLR
Regulation (EU) 2024/1624 (AMLR) elevates customer due diligence to a structurally integrated, risk-calibrated framework. Article 25 AMLR is a central component of that architecture. It requires obliged entities to understand, before onboarding or executing an occasional transaction, the purpose and intended nature of the relationship.
This is not a formalistic onboarding question. It is a legally binding, ex-ante obligation that determines how risk is assessed, how monitoring is calibrated, and how deviations are detected under Article 26 AMLR.
Basis and Timing
Article 25 AMLR requires that, prior to establishing a business relationship or carrying out an occasional transaction, the obliged entity must assure itself that it understands the purpose and intended nature of that relationship or transaction.
The obligation applies across all obliged entities and forms part of the core CDD sequence under Chapter III AMLR:
Without documented purpose identification, onboarding is incomplete under AMLR.
Mandatory Information Elements
Article 25 AMLR specifies the minimum categories of information to be obtained, where necessary, reflecting proportionality within the risk-based approach. The elements include:
Purpose and Economic Rationale
The obliged entity must understand:
- Why the customer seeks the relationship or transaction
- What economic objective is pursued
- Whether the structure is commercially plausible
This assessment prevents the creation of relationships lacking economic substance and serves as the baseline for plausibility checks.
Estimated Amount of Envisaged Activities
Obliged entities must collect information on:
- Expected transaction volumes
- Anticipated turnover
- Frequency of activity
This forms the quantitative expectation benchmark for ongoing monitoring under Article 26 AMLR. Material deviations become compliance triggers.
Source of Funds
The customer must provide information about:
- The origin of funds
- The economic source (salary, business income, investments, financing, etc.)
This enables a plausibility assessment at onboarding stage and supports escalation logic where inconsistencies arise.
Destination of Funds
Understanding where funds are intended to go is essential for:
- Country-risk assessments
- Sanctions screening
- Suspicion analysis under Chapter V AMLR
Destination data links onboarding with transaction monitoring architecture.
Business Activity or Occupation
For legal persons, the business activity must be identified.
For natural persons, the occupation must be determined.
This information anchors the customer’s economic profile and connects to inherent risk factors under Annex I–III AMLR.
Special Rule for High-Value Goods
Where obliged entities are covered by Article 74 AMLR (traders in high-value goods), Article 25 requires collection of information to determine whether goods are intended for:
- Commercial use
- Non-commercial use
This distinction directly influences reporting obligations under Chapter V AMLR.
Functional Role within the AMLR System
Article 25 AMLR acts as a structural bridge between:
- CDD data collection (Art. 20 AMLR)
- Ongoing monitoring (Art. 26 AMLR)
- Enhanced due diligence (Art. 34 AMLR)
- Suspicious transaction reporting (Art. 69 AMLR)
The declared purpose and intended nature create:
- The behavioural baseline
- The monitoring benchmark
- The deviation-detection framework
Without a defined purpose profile, effective ongoing monitoring is structurally impossible.
Supervisory Expectations and Audit Focus
Supervisors will (most likely) assess whether:
- Purpose documentation is customer-specific rather than generic
- Estimated activity levels are realistic and quantified
- Source and destination of funds are plausibility-checked
- Monitoring rules are aligned with the declared profile
Audit trails must demonstrate:
- Timestamped onboarding documentation
- Clear linkage between purpose data and risk classification
- Escalation logic when actual behaviour diverges from expected behaviour
Boilerplate statements such as “account for private use” are insufficient if not substantiated by contextual data.
Operational Implications for Obliged Entities
To ensure compliance with Article 25 AMLR, obliged entities should implement:
- Structured onboarding questionnaires
- Quantitative expected-activity fields
- Documented economic rationale capture
- Automated variance detection between expected and actual activity
- Escalation and review procedures for material deviations
Article 25 AMLR therefore converts purpose identification into a core parameter of AML risk engines, not a narrative annex to onboarding files.
Key Takeaways
Article 25 AMLR transforms the identification of purpose and intended nature into a legally enforceable risk-calibration mechanism.
Obliged entities must:
- Understand and document the economic rationale of each relationship
- Quantify expected activity
- Assess source and destination of funds
- Link occupation or business activity to risk classification
- Use this data as the baseline for continuous monitoring
In the AMLR framework, purpose identification is not descriptive. It is structural. Without it, neither risk assessment nor ongoing monitoring can operate in a compliant and defensible manner.