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Understanding Customer Behavior: The Key to Effective Suspicious Transaction Reporting

When it comes to reporting suspicious transactions, a financial institution’s knowledge of its customers is crucial. By understanding their business and historical patterns of transaction, institutions can identify potential red flags and take proactive measures to prevent financial crimes.

What Constitutes a Suspicious Transaction?

According to the Financial Intelligence Unit (FIU), a suspicious transaction must be reported when a reporting entity has formed a suspicion based on reasonable grounds. This means that if a reasonable person in similar circumstances would consider the transaction suspicious, then it is indeed suspicious and an STR must be submitted.

Factors to Consider When Determining Suspicious Transactions

In determining whether a transaction is suspicious, institutions should consider various factors, including:

• The customer’s profile
• Financial history
• Previous transactions

By analyzing these factors, institutions can identify unusual patterns or anomalies that may indicate criminal activity.

Typologies and Case Studies for Understanding Suspicious Transactions

The FIU provides typologies and case studies to help institutions understand the different types of suspicious transactions they may encounter. These resources are available for download on the FIU website and can be used to inform institutional policies and procedures.

Who Must Report Suspicious Transactions

If you are a reporting entity, as defined in Article 5 of the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Law, any transactions conducted or attempted using your services that are considered suspicious must be reported to FINTRACA. This includes both financial institutions and non-financial businesses.

How to Report Suspicious Transactions

There are two ways to report a suspicious transaction:

• Electronically: The preferred method, allowing for expedited processing and review of the report.
• Orally: In cases where urgency requires immediate action, an oral report can be made by contacting the FINTRACA Compliance Department.

Record Keeping and Training Requirements

As a reporting entity, you are required to:

• Keep records of all transactions for at least 5 years
• Keep STRs for at least 10 years after the transaction
• Maintain records for longer periods if requested to do so by any competent authority

In addition to record keeping, institutions must ensure that their personnel are trained in applicable aspects of relevant legislation, regulations, guidelines, and internal policies and procedures pertaining to AML/CFT. This training should include:

• Identifying transactions that are suspicious
• The indicators set out in the relevant regulations and guidelines

Conclusion

By focusing on customer behavior and understanding the different types of suspicious transactions, financial institutions can effectively prevent financial crimes and maintain a safe and secure environment for their customers.