Red Flags of Money Laundering
What is Money Laundering? The act of concealing or disguising (laundering) of funds obtained through illegal activity so that they appear to have been generated through legal, legitimate sources.
Illegal money/funds Types of Money- Laundering: • Structuring • Micro-Structuring • Cuckoo Smurfing
Legal money/assets
What is Structuring? • Structuring is one of the most common ways money launderers place money in the system • It is also known as smurfing. The individuals used to structure funds by organizations doing money laundering are called Smurfs
Red Flags of Structuring: Structuring red flags that banks and other financial institutions should look out for include: – Cash transaction between $6,000 and $10,000 – Frequent deposits for $9,000 or – Consecutive deposits that total $10,000
What is Micro-Structuring? Micro-structuring usually involves: • Checking accounts receiving cash deposits in amounts under $1,000 as infrequently as several times a month • These deposits may be followed by ATM withdrawals in foreign countries Red Flags of Micro-Structuring: • It has frequent deposits between $1,000 and $3,000 • Makes it difficult to discern from normal account transactions • Easiest way to detect and prevent micro-structuring is to have accurate and up-to-date Customer Due Diligence information is crucial to discover this type of structuring
Cuckoo-Smurfing • The term ‘cuckoo smurfing’ originated in Europe because of similarities between this typology and the activities of the cuckoo bird • The perpetrators of this money laundering typology seek to transfer wealth through the bank accounts of innocent third parties
Identity Theft Red Flags • First opportunity to uncover identity theft is at the time of account opening • Examine the identification proof given by the customer carefully • Factors to look at carefully: – Does the picture on the ID match the person in front of you? – Does the year of birth match the person in front of you? – Does the identification match the state? – Is the identification real?
• Use tools like Lexis Nexis to verify background information
Want to learn more about anti-money laundering process, its regulations, red flags and best practices? ComplianceOnline webinars and seminars are a great training resource. Check out the following links: • Red Flags of Money Laundering • Managing an Effective AML Compliance Program • Are You Doing Your BSA/AML Risk Assessment Properly? • How to Report under AML/BSA? • BSA/AML Compliance Checklist • How to Create Effective AML/BSA Compliance Program? • How to Develop Risk Models for AML Monitoring Program?