- Opening Shell Companies: Money launderers may use financial institutions to open and operate shell companies, which have no legitimate business activities but serve as conduits for moving and disguising funds.
- Bulk Cash Deposits: Criminals might deposit large amounts of cash into bank accounts to make it appear as if the money comes from a legitimate source.
- Complex Transactions: Money launderers conduct a series of transactions within and between financial institutions, often in multiple jurisdictions, to make it challenging for authorities to follow the money trail.
- False Documentation: Criminals may use forged or falsified documents to open accounts, transfer funds, or secure loans.
- Swift Cross-Border Transactions: International financial institutions may be used to move money across borders quickly, taking advantage of differences in regulations and reporting requirements.
Below are some examples of sector-specific ML/TF indicators that should be consider when providing financial services to current or potential clients:
Accounts at Financial Institutions
- Account that was reactivated from inactive or dormant status suddenly sees significant activity.
- Account with a large number of small cash deposits and a small number of large withdrawals.
- Activity far exceeds activity projected at the time of opening the account.
- An account operated in the name of an offshore company with structured movement of funds.
- Any individual or company whose account shows virtually no normal personal banking or business related activities, but is used to receive or disburse large sums which have no obvious purpose or relationship to the account holder and/or their business (e.g. a substantial increase in turnover on an account).
- Attempting to open or operating accounts under a false name.
- Deposits or withdrawals of multiple monetary instruments, particularly if the instruments are sequentially numbered.
- Establishment of multiple accounts, some of which appear to remain dormant for extended periods.
- Funds are being deposited into several accounts, consolidated into one and transferred outside the country.
- High velocity of funds through an account, i.e. low beginning and ending daily balances which do not reflect the large volumes of dollars flowing through an account.
- Large cash withdrawals from a previously dormant/inactive account, or from an account which has just received an unexpected large credit from abroad.
- Large number of individuals making payments into the same account without an adequate explanation.
- Matching of payments out with credits paid in by cash on the same or previous day.
- Multiple depositors using a single bank account.
- Multiple deposits are made to a customer’s account by third parties.
- Multiple personal and business accounts are used to collect and then funnel funds to a small number of foreign beneficiaries, particularly when they are in locations of concern.
- Multiple transactions are carried out on the same day at the same branch but with an apparent attempt to use different tellers.
- Opening accounts with names very close to other established business entities.
- Paying in large third party cheques endorsed in favour of the customer.
- Reactivated dormant account containing a minimal sum suddenly receives a deposit or series of deposits followed by frequent cash withdrawals until the transferred sum has been removed.
- Substantial increases of cash or negotiable instruments by a professional firm company, using client accounts or in house company or trust accounts, especially if the deposits are promptly transferred between other client companies and trust accounts.
- Unexplained transfers between the customer’s products and accounts.
Customers and their financial or business activity.
- Companies’ representatives avoiding contact with the branch.
- Customers who appear to have accounts with several institutions within the same locality, especially when the institution is aware of a regular consolidation process from such accounts prior to a request for onward transmission of funds.
- Customers who have numerous accounts and pay in amounts of cash to each of them in circumstances in which the total of credits would be a large amount.
- Customers who maintain an unusually large number of accounts for the type of business they are purportedly conducting and/or use inordinately large number of fund transfers among these accounts.
- Customers who together, and simultaneously, use separate tellers to conduct large cash transactions or foreign exchange transactions.
- Customers who wish to maintain a number of trustee or clients’ accounts which do not appear consistent with their type of business, including transactions which involve nominee names.
- Reluctance to provide normal information when opening an account, providing minimal or fictitious information or, when applying to open an account, providing information that is difficult or expensive for the institution to verify.
Transactions with international connections
- Accumulation of large balances, inconsistent with the known turnover of the customer’s business, and subsequent transfers to overseas accounts.
- Building up of large balances, not consistent with the known turnover of the customer’s business, and subsequent transfer to accounts held overseas.
- Customers introduced by an overseas branch, affiliate or other bank based in countries where production of drugs or drug trafficking may be prevalent.
- Customers who make regular and large payments, including wire transactions, that cannot be clearly identified as bona fide transactions to, or receive regular and large payments from, countries who are commonly associated with the production, processing or marketing of drugs.
- Deposits followed within a short time by wire transfers to locations of concern, such as countries known or suspected to facilitate money-laundering activities.
- Frequent requests for traveler’s cheques, foreign currency drafts or other negotiable instruments.
- Loans secured by obligation from offshore banks.
- Loans to or from offshore companies.
- Numerous wire transfers received in an account but each transfer is below the reporting requirement in the remitting country.
- Offers of large deposits from a confidential source to be sent from an offshore bank or somehow guaranteed by an offshore bank.
- Transactions involving a “shell” bank whose name may be very similar to the name of a major legitimate institution.
- Transactions involving countries deemed by the Financial Action Task Force as requiring enhanced surveillance.
- Unexplained electronic funds transfers by a client on an in-and-out basis.
- Use of a credit card issued by a foreign bank that does not operate in country by a customer that does not live and work in the country of issue.
