Financial Crime World

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Suspicious Transactions: A Guide for Financial Institutions

As financial institutions (SFIs) continue to play a crucial role in detecting and preventing money laundering, terrorist financing, and proliferation financing (ML/TF/PF), it is essential to establish guidelines for reporting suspicious transactions.

Assessing Suspicion

When assessing suspicion, SFIs should consider various factors, including:

  • The type and value of the transaction
  • The customer’s business, economic, and financial status
  • Their employment history, general background, and behavior
  • All circumstances surrounding the transaction, such as:
    • Source and destination parties
    • Jurisdiction (including high-risk jurisdictions)
    • Beneficial owners where applicable

Evaluation of Transactions

Each transaction or activity should be evaluated in terms of what seems appropriate and is within normal practice in a particular line of business, based on knowledge of who the customer is. If transactions or activities do not appear to be in keeping with normal industry practices, it may be a relevant factor for determining whether there are reasonable grounds to suspect that they are related to ML/TF/PF.

Important Factors

Other important factors include:

  • Loan repayments inconsistent with a customer’s stated income
  • Early repayment of a loan followed by an application for another loan
  • Additional indicators outlined in Annex 1

Review of the STR/SARS Guidelines

SFIs should always refer to other reports regarding ML/TF typologies as issued by the Financial Intelligence Authority (FIA), risk assessment reports, and regional reports issued by the Financial Action Task Force (FATF). High-risk jurisdictions, as defined by FATF, have significant strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. SFIs are advised to apply enhanced due diligence and, in some cases, countermeasures to protect the international financial system.

Suspicious Transactions/Activity Reporting Guidelines

SFIs should ensure full compliance with these guidelines and compile any comments that arise during implementation for appropriate action. Comments should be forwarded to:

  • Office of the Executive Director,
  • Supervision Directorate,
  • Bank of Uganda,
  • 3rd Floor, Plot 45,
  • Kampala Road, Kampala,
  • Uganda.

Indicators of Suspicious Transactions

Annex 1 outlines specific indicators by product, including general indicators and those related to specific products. These indicators are potential red flags that may initiate suspicion and prompt further assessment.

Conclusion

By following these guidelines, SFIs can effectively identify and report suspicious transactions, thereby contributing to the prevention of ML/TF/PF.