Someone asked me today
"How does one end up on these banking watch lists"?
Entities that receive an MSB are subject to SAR reports and other materials. A specific person at a company is typically in charge of taking care of these sort of things. At a bank a compliance officer is typically tasked with this.
The following are examples of potentially suspicious activities, or "red flags" for both money laundering and terrorist financing. Although these lists are not all-inclusive, they may help banks and examiners recognize possible money laundering and terrorist financing schemes. FinCEN issues advisories containing examples of "red flags" to inform and assist banks in reporting instances of suspected money laundering, terrorist financing, and fraud. In order to assist law enforcement in its efforts to target these activities, FinCEN requests that banks check the appropriate box(es) in the Suspicious Activity Information section and include certain key terms in the narrative section of the SAR.
When an exchange or bank or other MSB sees these types of things they are expected to fill out the appropriate paperwork and report it.
The answer can be found here:
http://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_106.htmAnything look familiar? If you were checking boxes for Mr. Garza how many would you check? Here is a random sampling from that manual page...
A customer is a trust, shell company, or Private Investment Company that is reluctant to provide information on controlling parties and underlying beneficiaries. Beneficial owners may hire nominee incorporation services to establish shell companies and open bank accounts for those shell companies while shielding the owner’s identity.
Funds transfer activity occurs to or from a financial secrecy haven, or to or from a higher-risk geographic location without an apparent business reason or when the activity is inconsistent with the customer’s business or history.
Funds transfer activity occurs to or from a financial institution located in a higher risk jurisdiction distant from the customer's operations.
Large, incoming funds transfers are received on behalf of a foreign client, with little or no explicit reason
Payments or receipts with no apparent links to legitimate contracts, goods, or services are received.
Funds transfers contain limited content and lack related party information.
Large-value, automated clearing house (ACH) transactions are frequently initiated through third-party service providers (TPSP) by originators that are not bank customers and for which the bank has no or insufficient due diligence.
The currency transaction patterns of a business show a sudden change inconsistent with normal activities.
A large volume of cashier’s checks, money orders, or funds transfers is deposited into, or purchased through, an account when the nature of the accountholder’s business would not appear to justify such activity.
Unusual transfers of funds occur among related accounts or among accounts that involve the same or related principals.
Payments for goods or services are made by checks, money orders, or bank drafts not drawn from the account of the entity that made the purchase.
Loans secured by pledged assets held by third parties unrelated to the borrower.
Loans are made for, or are paid on behalf of, a third party with no reasonable explanation.
Loans that lack a legitimate business purpose, provide the bank with significant fees for assuming little or no risk, or tend to obscure the movement of funds (e.g., loans made to a borrower and immediately sold to an entity related to the borrower).
Multiple wire transfers initiated by foreign nonbank financial institutions that direct U.S. banks to remit funds to other jurisdictions that bear no apparent business relationship with that foreign nonbank financial institution. Recipients may include individuals, businesses, and other entities in free trade zones and other locations.
Customers conducting business in higher-risk jurisdictions.
Payments to or from the company have no stated purpose, do not reference goods or services, or identify only a contract or invoice number.
Transacting businesses share the same address, provide only a registered agent’s address, or have other address inconsistencies.
Multiple high-value payments or transfers between shell companies with no apparent legitimate business purpose.
Employee exhibits a lavish lifestyle that cannot be supported by his or her salary.
Suspicious movements of funds occur from one bank to another, and then funds are moved back to the first bank.
Funds are generated by a business owned by persons of the same origin or by a business that involves persons of the same origin from higher-risk countries (e.g., countries designated by national authorities and FATF as noncooperative countries and territories).
A large number of incoming or outgoing funds transfers take place through a business account, and there appears to be no logical business or other economic purpose for the transfers, particularly when this activity involves higher-risk locations.
Multiple accounts are used to collect and funnel funds to a small number of foreign beneficiaries, both persons and businesses, particularly in higher-risk locations.
Funds are sent or received via international transfers from or to higher-risk locations.
Which things would set your red flags off in this situation?
