Financial Crime World

Combating Illicit Activities: Financial Institutions’ Role

Red Flags in Transactions

Financial institutions have been issued a guidance document highlighting suspicious transaction patterns that may indicate malicious activity. These include:

  • Unusual or inconsistent customer information
  • Large cash withdrawals or wire transfers from multiple locations
  • Transactions linked to high-risk locations or countries
  • Inconsistencies in the process of identifying or verifying customers

Additionally, financial institutions are advised to be cautious of transactions involving foreign currency exchanges followed by wire transfers to locations of concern. They should also watch out for business accounts with no logical economic purpose and multiple accounts used to collect and channel funds to a small number of beneficiaries.

The guidance document highlights suspicious activity related to travel, including:

  • Customers who have traveled or attempted to travel to high-risk jurisdictions or countries under conflict or political instability
  • Customers making daily maximum cash withdrawals at multiple locations over a wide geographic area

Financial institutions are advised to be cautious of these patterns and report any suspicious activity to the relevant authorities.

Securities Fraud Indicators

The document identifies suspicious indicators associated with securities products, including:

  • Customers opening numerous accounts for different legal entities they control
  • Receipt of many incoming cheques or wire transfers from unrelated third parties
  • Allocation of incoming deposits among numerous accounts

Financial institutions are advised to be cautious of these patterns and report any suspicious activity to the relevant authorities.

Insurance Fraud Indicators

The document highlights suspicious indicators associated with insurance fraud, including:

  • Transactions in which policies are cancelled shortly after premiums have been paid, resulting in the return of premiums
  • Transactions that are not commensurate with the customer’s apparent financial means

Financial institutions are advised to be cautious of these patterns and report any suspicious activity to the relevant authorities.

Conclusion

By being aware of these red flags, financial institutions can play a crucial role in preventing terrorist financing and other illicit activities. It is essential for them to remain vigilant and report any suspicious activity to the relevant authorities to ensure the integrity of the financial system.