Who Are High Risk Customers and Why?

High-risk customers are those who operate in an industry that is considered high risk by financial institutions. Whether a customer is labeled as high risk or not will also depend on other factors, including but not limited to the industry type, chargeback activity, transaction size, billing model, and credit score.

Once a customer is labeled as high risk, it can be more difficult to secure payment processing with traditional financial institutions. Today, we'll explain who high-risk customers are and why this is important for your business.

Who are high-risk customers and why does this matter?

High-risk customers are individuals or businesses that financial institutions believe pose a greater chance of chargebacks, fraud, terrorist financing, or money laundering. This can include industries with higher refund or dispute rates (such as online gaming, travel, or adult entertainment) or customers with limited credit history and inconsistent transaction behavior. Issuing banks and payment processors check for high-risk customers as part of their KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance processes, to fulfill regulatory compliance requirements and do enhanced due diligence. These checks help protect both the bank and the payment network from potential financial loss or legal issues. By evaluating risk levels, banks can assess the customer's risk profile, determine credit limits, apply additional verification measures, or in some cases, decline to issue cards or process payments for certain accounts.

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Differences between low- and high-risk customers

Not all customers or businesses are treated equally by financial institutions. When it comes to payment processing, providers classify clients as either low risk or high risk based on several factors, including industry type, transaction patterns, credit history, and chargeback behavior.

Feature	High-risk customers	Low-risk customers
Industry type	Operate in industries with higher chargeback or fraud rates (e.g., travel, CBD, adult, crypto, cash-intensive businesses or subscription-based businesses).	Operate in stable, regulated industries such as retail, hospitality, or professional services.
Transaction behavior	Larger transaction amounts or inconsistent patterns that can trigger fraud alerts.	Smaller, consistent transaction volumes.
Chargeback activity	Frequent chargebacks or refund disputes.	Low or no history of chargebacks.
Credit profile	Poor or limited business credit history.	Strong credit and financial history.
Billing model	Often use recurring billing, free trials, or delayed fulfillment.	Typically process single, straightforward transactions.
Processing risk	Higher risk for fraud and losses, requiring specialized merchant accounts.	Considered stable and suitable for standard payment processing.

Is your business considered high risk by financial institutions?

Whether or not your business is considered high risk often depends on the following circumstances:

• Credit score: Just like in the personal finance space, businesses with bad credit (or no/limited credit history) might be classified as high-risk clients in the banking industry.
• Billing model: If your business offers free trials that upgrade to paid subscriptions, it will likely be a high-risk business. Subscriptions and other forms of recurring billing are often labeled high risk by traditional payment processors.
• High Rates of fraud or chargebacks in your industry: As you might expect, if you go into an industry known for a higher-than-average fraud or chargeback ratio, your business is likely to be labeled high risk.

Customers by industry

Some industries are considered to have more risk than others, as they typically fall under the above-mentioned circumstances. Some examples of higher-risk industries are:

• Credit Repair
• Psychics
• Web Design/Hosting
• Travel
• Business Consulting
• Large Ticket Accounts
• Online Dating
• Identity Theft Protection

• Prop Firms
• Collection Agencies
• Nutraceutical
• Recurring Billing
• Adult
• Telemedicine
• Software & eBook
• Antiques & Collectibles

• E-Cig/Vape
• Online Furniture
• Moving & Transportation
• Firearms
• SEO/SEM
• Dropshipping
• Jewelry
• CBD

Some payment providers don't want to deal with managing high-risk customers so they turn them down before even going through the regulatory scrutiny, just based on industry or location. When compliance teams do their due diligence measures, they may also look at the individuals behind the account and turn them down if e.g. they are politically exposed persons.

What are high-risk countries?

High-risk countries are those identified by international regulators as having increased potential for money laundering, terrorist financing, corruption, or weak financial oversight. Businesses that operate in or process payments from these countries often face stricter compliance requirements and additional verification steps when applying for merchant accounts or conducting cross-border transactions. Banks and payment processors monitor these countries closely because their anti-money laundering (AML) and counter-terrorism financing (CTF) controls may not meet global standards. The Financial Action Task Force (FATF) regularly updates its list of jurisdictions under increased monitoring or subject to calls for action, often referred to as “grey list” and “blacklist” countries. Examples of countries frequently classified as high risk include:

• Afghanistan
• Iran
• North Korea
• Myanmar
• Syria
• Yemen
• Democratic Republic of the Congo
• Haiti
• South Sudan
• Nigeria
• Pakistan
• Albania
• Barbados
• Burkina Faso
• Jamaica
• Mali
• Mozambique
• Panama
• Senegal
• Uganda
• United Arab Emirates

Countries may be added to or removed from this list over time, depending on their compliance progress with FATF recommendations and international financial standards.

Anti-money laundering and high-risk customer types

Showing proof of Anti-Money Laundering (AML) practices is an important part of becoming approved for payment processing, specifically for high-risk customers in industries such as cryptocurrencies. AML refers to the regulations and procedures in place that comply with legal requirements related to suspicious financial activity. An example of an AML procedure might involve what is known as a holding period. This means the funds from a transaction are held in an account for a specific number of business days. It’s common for crypto exchanges to be required to show proof of what AML procedures they have in place before setting up a merchant account with an independent payment processing provider.

AML vs. Know Your Customer

Know Your Customer (KYC) is often confused with AML practices and though both are important, they are two separate elements of risk assessment. While AML proof of practice is often required for crypto exchange businesses to open a merchant account/utilize payment processing services, KYC is a series of steps taken by the payment processing provider to ensure the customer is who they say they are (and does not have a history of fraudulent activity). KYC might include requesting documents such as a passport, driver’s license, or government-issued ID. You might also need to provide a voided check or bank letter, 3 months of your most recent credit card processing statements for your previous provider, and 3 months of your most recent bank statements.

	Anti-Money Laundering (AML)	Know Your Customer (KYC)
Main purpose	Prevents illegal financial activities such as money laundering, fraud, and terrorist financing.	Verifies the identity of customers before allowing them to use financial services.
Focus area	Detecting and reporting suspicious transactions after an account or relationship is established.	Confirming customer identity and legitimacy during the onboarding process.
Timing	Ongoing — applied throughout the business relationship with continuous monitoring.	Conducted at the start of the relationship, before account approval or transaction processing.
Key activities	Transaction monitoring systems, reporting suspicious activity, maintaining compliance programs.	Collecting and verifying documents like IDs, bank statements, and proof of address.
Who enforces it	Global and national regulators such as FATF, FinCEN, and regional financial authorities.	Financial institutions and payment processors under AML and financial compliance laws.
Goal	Protect the financial system from being used for criminal or terrorist purposes.	Ensure that customers are legitimate and reduce the risk of fraud or identity theft.

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Your Reliable Payment Processing Solution

At TailoredPay, we’re high-risk merchant account and payment processing experts that have our clients’ best interests in mind. Our carefully selected range of online and virtual payment gateways are ideal for high-risk businesses of all shapes and sizes.  Get in touch today, and find out how TailoredPay can help your business grow.

Merchant accounts for high-risk customers

So, if traditional institutions won’t offer merchant accounts to high-risk customers, how can a high-risk business obtain an account? By contacting a high-risk merchant account provider. They can provide payment processing services to businesses that are classified as having a higher probability of chargebacks or fraud relative to more traditional businesses, larger transaction sizes, high-risk labeled industries, and order fulfillment timeframes that are considered too high-risk. At TailoredPay, we’re high-risk merchant account and payment processing experts who have our clients’ best interests in mind. Our carefully selected range of online and virtual payment gateways are ideal for high-risk businesses of all shapes and sizes.

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Get approved for a merchant account in less than 24 hours

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Frequently asked questions

What makes a customer high risk?

Your business is likely to be deemed high risk by traditional financial institutions if it has one or more of the following: Bad credit, free trials, recurring billing, high-ticket sales, high rates of fraud, or a large number of chargebacks in your industry. To define high-risk customers, this is typically the criteria used. By taking this risk based approach, money service businesses protect themselves against financial crime, money laundering and regulatory penalties.

Who are high-risk customers for payment processors? 

High-risk customers are typically conducting business in industries that are considered to be high risk. This can include organizations in the cryptocurrency space and companies that sell alcohol or CBD products.

Who are medium risk customers? 

Medium-risk customers often fall into the high-risk category, which means there isn’t necessarily a “medium risk” category. Low-risk customers typically meet the following criteria: Have transaction volumes less than $20,000 per month, only use one currency, have an average transaction amount of $500 or less, conduct business in one country that is also considered to be low risk, experience very little to no chargebacks, and operate in an industry that is deemed low risk.

How do you find your high-risk customers? 

The classification of high-risk customers tends to be based on the industry, since some industries are considered riskier than others. You can view an industry list here.