Whether it is the financial institution or the client that may become a victim of a scam when a fraudster is employing a deceptive scheme to remove them of their money, there are a number of red flags that you need to be looking out for from preventing one happening in the first place. Here is some key information in this regard from FINTRAC, Canada’s anti-money laundering agency, which has many red flags noted and just one area contained in this posting is on money service businesses like financial institutions and wire transfers.
ML/TF stands for money laundering/terrorist financing
STR stands for Suspicious Transaction Report
Money laundering and terrorist financing indicators—Money services businesses
From: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
Overview
ML/TF indicators are potential red flags that could initiate suspicion or indicate that something may be unusual in the absence of a reasonable explanation. Red flags typically stem from one or more factual characteristics, behaviours, patterns or other contextual factors that identify irregularities related to financial transactions or attempted transactions. These often present inconsistencies with what is expected of your client based on what you know about them.
The ML/TF indicators in this guidance were developed by FINTRAC through a three-year review of ML/TF cases, a review of high quality STRs, published literature by international organizations such as the Financial Action Task Force (FATF) and the Egmont Group, and consultation with reporting entity sectors. These ML/TF indicators do not cover every possible situation but were developed to provide you with a general understanding of what is or could be unusual or suspicious. On its own, a single ML/TF indicator may not appear suspicious. However, observing an ML/TF indicator could lead you to conduct an assessment of the transaction(s) to determine whether there are further facts, contextual elements or additional ML/TF indicators that assist in establishing reasonable grounds to suspect the commission or attempted commission of an ML/TF offence, which requires the submission of an STR.
Criminal organizations often combine various methods in different ways in order to avoid the detection of ML/TF. If you detect unusual or suspicious behaviour or a transaction that prompts the need for an assessment, ML/TF indicators combined with facts and context can help you determine if there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of an ML/TF offence. These ML/TF indicators may also be used to explain or articulate the rationale for your reasonable grounds to suspect in the narrative portion of an STR, as they provide valuable information from a financial intelligence perspective.
ML/TF indicators involving wire transfers (including electronic funds transfers)
In our current global environment, it is increasingly easier to transfer funds to, from or through multiple jurisdictions (municipal, national or international) in a rapid fashion. This presents an increased ML/TF risk as transactions through multiple jurisdictions increases the difficulty for reporting entities and law enforcement to trace illicit funds. Examples of these types of transactions which may require further assessment include the following.
- Client is unaware of details surrounding incoming wire transfers, such as the ordering client details, amounts or reasons.
- Client does not appear to know the sender of the wire transfer from whom the wire transfer was received, or the recipient to whom they are sending the wire transfer.
- Client frequents multiple locations utilizing cash, prepaid credit cards or money orders/cheques/drafts to send wire transfers overseas.
- The client sends wire transfers or receives wire transfers to or from multiple beneficiaries that do not correspond with the expected activity of the client.
- Client is accompanied by persons who appear to be instructing the sending or receiving of wire transfers on their behalf.
- Multiple persons are sending wire transfers that are similar in amounts, receiver names, security questions, addresses or destination country.
- Client attempts to specify the routing of an international wire transfer.
- Client conducts wire transfers that do not include theirs or the beneficiary’s requisite information.
- Client utilizes structured cash transactions to send wire transfers in an effort to avoid record keeping requirements.
- Multiple clients have sent wire transfers over a short period of time to the same recipient.
- Large and/or frequent wire transfers between senders and receivers with no apparent relationship.
- Client sending to, or receiving wire transfers from, multiple clients.
Here are a few links on common red flags with respect to financial fraud.
https://www.kychub.com/blog/top-aml-red-flags/
https://kyc-chain.com/aml-101-the-10-most-common-red-flags/