Money Laundering Indicators

Specific indicators on Professional Service Providers

Professional service providers encompass both corporations and individuals, offering specialized services such as legal, financial, or trust and company services. It is possible for criminals to seek assistance from unsuspecting professional service providers. Conversely, some professional service providers may knowingly aid criminals in concealing the illicit movement of funds. The following are money laundering indicators specific to Professional Service Providers: 

Legal Professionals

  • Client appears to be living well beyond his or her means in light of his or her employment, profession or business.
  • Client is conducting normal business transactions, but the transactions are not consistent with the nature of his or her employment, profession or business.
  • Client is reluctant to discuss his or her financial affairs when this type of behaviour is inconsistent with the ordinary business practice of the client, or out of context with the nature of the transaction being conducted.
  • Client requests anonymity.
  • Client seems unconcerned about the legal fees on an aborted transaction.
  • Client wants to co-ordinate international transactions, including currency exchanges, or to co-ordinate cross border movement of funds when this type of transaction is inconsistent with his or her ordinary business practice.
  • Client asks to establish a nominee company or a trust for deposits of funds in country or overseas when this type of transaction is inconsistent with his or her ordinary business practise.
  • Client makes unusual requests for placement of funds into trust account for safekeeping.
  • Client refuses to discuss the business purpose of the transaction.
  • Client seeks to obtain trust account information and is prepared to pay unusually high fees to use this information and account.
  • Client offers to pay a much higher fee than is usually charged to get assistance on a transaction involving large sums.


Accountants

  • Client appears to be living beyond his or her means.
  • Client has a history of changing bookkeepers or accounts yearly.
  • Client has business activity inconsistent with industry averages or financial ratios.
  • Client has cheques inconsistent with sales (i.e., unusual payments from unlikely sources).
  • Client is uncertain about location of company records.
  • Company acquires large personal and consumer assets (i.e., boats, luxury automobiles, personal residences and cottages) when this type of transaction is inconsistent with ordinary business practice of the client or the practice of that particular industry.
  • Company carries non-existent or satisfied debt that is continually shown as current on financial statements.
  • Company has no employees, which is unusual for the type of business.
  • Company is invoiced by organisation located in a country that does not have adequate money laundering laws and / or is known as a highly secretive banking and / or corporate tax haven.
  • Company is paying unusual consultant fees to offshore companies.
  • Company makes large payments to subsidiaries or similarly controlled companies that are not within the normal course of business.


Securities

  • A customer who deals with a securities or futures broker only in cash or cash equivalents rather than through banking channels.
  • A number of transactions by the same counter party in small amounts relating to the same security, each purchased for cash and then sold in one transaction, the proceeds being credited to an account different from the original account.
  • Any dealing with an agent where the identity of the ultimate beneficiary or counter party is undisclosed, contrary to normal procedures for the type of business concerned.
  • Any transaction in which the counter party to the transaction is unknown or where the nature, size or frequency appears unusual.
  • Back-to-back deposit/loan transactions with subsidiaries of, or affiliates of, overseas financial institutions in known drug trafficking areas.
  • Buying and selling of a security with no discernable purpose or in circumstances that appear unusual.
  • Changes in employee characteristics, for example, lavish life styles.
  • Changes in employee or agent performance, for example, the salesman selling products for cash has remarkable or unexpected performance.
  • Investor introduced by an overseas bank, affiliate or other investor both of which are based in countries where production of drugs or drug trafficking may be prevalent.
  • Large or unusual settlements of securities transactions in cash or bearer form.
  • Purchasing of securities to be held by the institution in safe custody, where this does not appear appropriate given the customer’s apparent standing.
  • The entry of matching buys and sells in particular securities or future contracts (“wash trading”), creating the illusion of trading.
  • The use by a customer of a securities or futures brokerage firm as a place to hold funds that are not being used to trade in securities.
  • The use of an address that is not the customer’s permanent address, for example, utilisation of the salesman’s office or home address for the dispatch of customer documentation.


Trust and Corporate Service Providers

  • The establishment of companies or trusts which have no obvious commercial purpose.
  • Clients/customers who appear uninterested in legitimate tax avoidance schemes.
  • The excessive or unnecessary use of nominees.
  • The unnecessary granting of wide ranging Powers of Attorney.
  • Complex group structures without a cause.
  • Subsidiaries which have no apparent purpose.
  • The use of bank accounts in several currencies for no apparent reason.
Specific indicators on Real Estate

Real estate has long been the preferred choice of criminals for hiding ill-gotten gains. Manipulating property prices stands as one of the most time-honored methods of illicitly transferring proceeds between parties involved in a transaction. Aside from its emotional allure, real estate possesses other attractive attributes, including its substantial monetary worth, the potential for appreciation over time, and the chance to obscure true ownership. Below are some examples of sector-specific ML/TF indicators that should be consider when dealing with current or potential clients:

Unusual possession
  • Non-transparent ownership
  • Lack of income in relation to purchase price
  • Social network of criminal person
  • Fast-growing portfolio
  Unusual transactions
  • Unusual parties to the transaction
  • Unusual transaction prices
  • Unusual transaction results
  Unusual financing
  • Unusual origin of the funds
  • Unusual lender
  • Unusual borrower
  • Unusual loan agreement
  • Unusual financing result
 
Specific Indicators on Financial Service Providers

Financial service providers can be used for money laundering due to their role in facilitating the movement, storage, and conversion of funds. Money laundering through financial institutions typically involves a series of steps designed to make illicit funds appear legitimate. Here are some specific methods through which they can be exploited:

  • 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.
Specific Indicators on Money Service Businesses

In addition to the general ML/TF indicators that have been highlighted in the Financial Service Providers section, there are more specific ML/TF indicators related to Money Service Businesses (MSB), including foreign exchange dealers and money remitters. Below are some examples of sector-specific ML/TF indicators that should be consider when providing MSB services to current or potential clients:

  • Client exchanges currency and requests the largest possible denomination bills in a foreign currency.
  • Client knows little about address and contact details for the payee, is reluctant to disclose this information, or requests a bearer instrument.
  • Client wants a cheque issued in the same currency to replace the one being cashed.
  • Client wants cash converted to a cheque and you are not normally involved in issuing cheques.
  • Client sends money to multiple Money Cards.
  • Client receives money to their Money Card from multiple unrelated parties.
  • Client sends or receives money from multiple unrelated parties.
  • Client enters into transactions with counter parties in locations that are unusual for the client.
  • Client instructs that funds are to be picked up by another party on behalf of the payee.
  • Client makes purchases of money orders in large volumes.
  • Client requests numerous cheques in small amounts and various names, which total the amount of the exchange.
  • Client requests that a large amount of foreign currency be exchanged to another foreign currency.
  • Client enquires about the reporting threshold.
  • Client changes the amount in order to avoid the reporting threshold.
Specific Indicators on Insurance Providers

Insurance providers can be used for money laundering in various ways. To combat these money laundering risks, insurance companies are subject to various regulations and compliance measures, including customer due diligence, transaction monitoring, and reporting of suspicious activities. Here are some indicators through which individuals or entities might attempt to use insurance providers for money laundering:

  • Customer applicant for insurance business appears to have policies with several different institutions.
  • Customer applicant for insurance business attempts to use cash to complete a proposed transaction when this type of business transaction would normally be handled by cheques or other payment instruments.
  • Customer applicant for insurance business establishes a large insurance policy and within a short time period cancels the policy, requests cash value returned, payable to a third party.
  • Customer applicant for insurance business is reluctant to provide normal information when applying for a policy, providing minimal or fictitious information or, provides information that is difficult or expensive for the institution to verify.
  • Customer applicant for insurance business purchases policies in amounts considered beyond his or her apparent means.
  • Customer applicant for insurance business requests to make a lump sum payment by a wire transfer or with foreign currency.
  • Customer applicant for insurance for insurance business shows no concern for the performance of the policy but much concern for the early cancellation of the contract.
  • Customer applies for a policy in a distant place when a comparable policy could be provided “closer to home”.
  • Customer applies for a policy relating to a business outside the policyholder’s normal pattern of business.
  • Customer attempts to use a third-party cheque to make a proposed purchase of a policy.
  • Customer fails to provide or delays excessively in the provision of information to enable verification to be completed.
  • Customer is introduced by an agent/intermediary in an unregulated or loosely regulated jurisdiction or where organised criminal activities (e.g. drug trafficking or terrorist activity) are prevalent.
  • Customer requests the purchase of a large lump sum contract where his or her previous contracts were small, regular payments contracts.
  • Customer terminates a product early, especially at a loss caused by front end loading, or where cash was tendered and/or the refund check is to a third party.
  • Transactions involving an undisclosed party.
  • Transfer of the benefit of a product to an apparently unrelated third party.
Specific Indicators on Dealers in Precious Metals and Stones

Dealers in precious metals and stones can be used as a means to launder money due to several characteristics of these assets, such as their high value, portability, and the relative ease with which they can be traded. Here are some indicators for those dealing in precious metals and stones:

  • A customer asking about the possibility of returning goods and obtaining a cheque (espeically if the customer requests that cheque be written to a third party).
  • A customer orders item, pays for them in cash, cancels the order and then receives a large refund.
  • A customer paying for high-priced jewellery or precious metal with cash only.
  • Attempts by customer or supplier to maintain high degree of secrecy with respect to the transaction, such as request that normal business records not be kept.
  • Customer indiscriminately purchases merchandise without regard for value, size, or color.
  • Customer is reluctant to provide adequate identification information when making a purchase.
  • Purchase appears to be beyond the means of the customer based on their stated or known occupation or income.
  • Purchases or sales that are not in conformity with standard industry practice.
  • Purchases or sales that are unusual for customer or supplier.