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Financial Transactions: Is Your Bank Account Activity Suspicious? Financial Transactions: Is Your Bank Account Activity Suspicious?


Banking transactions:
Don't raise the red flags

Unusual bank account activity: Are your
financial transactions suspicious?

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Unusual account activity: Are your transactions suspicious?
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US dollar: The new tool of financial oppression?
Surveillance of financial transactions set to rise
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(Part 2 of 6)

Banks are busily reporting so-called unusual financial transactions. Establishing an effective line of communication with your account officer should be your first line of defence.

OFFSHORE-FOX.COM
with Alex Hanson

According to rule 14 of the Financial Action Task Force on Money Laundering (FATF)

"14. Financial institutions should pay special attention to all complex, unusual large transactions, and all unusual patterns of transactions ... The background ... of such transactions should ... be examined, the findings established in writing, and be available to help supervisors, auditors and law enforcement agencies."

While bankers are being told to watch out for any unusual activity or transactions being executed on clients' accounts in order to identify funds of criminal origin, no definite or reliable explanation of what exactly should be considered "unusual" exists.

In practice, unusual bank account activity refers to financial transactions that appear in some way atypical when compared to the bulk of previous account activity, or when judged against the account holder's assumed lifestyle or business, or -- particularly for new accounts -- when not in line with the bank account's stated or assumed purpose.

In practice, unusual bank account activity refers to financial transactions that appear atypical when compared to previous account activity, or when judged against the account holder's assumed lifestyle or business.

The underlying criterion for the "unusualness" may be the size of transactions, their frequency, pattern, or their destination or source. The obvious vagueness of the term "unusual" allows your banker to exercise his own judgment and add his own criteria.

Too large, too frequent, too anything

It is difficult to offer a broad guide as to what constitutes "unusual" financial transactions. Policies vary across countries and banks and, ultimately, each account officer's judgment and diligence plays a part.

In general, the following is most often considered "unusual":

  • Large cash deposit;
  • Large cash withdrawal;
  • Frequent cash deposits;
  • Frequent cash withdrawals;
  • Pattern of visits to a safety deposit box followed by cash deposits;
  • Large money transfer -- incoming or outgoing, or in combination: a large incoming money transfer followed by an outgoing payment;
  • Frequent money transfers: incoming, outgoing, or in combination;
  • Any money transfer received from, or sent to, an offshore bank;
  • Frequent financial transactions of any kind involving amounts just under any applicable reporting limit;
  • Pattern/volume of financial transactions not in line with the account stated purpose;
  • Pattern/volume of financial transactions not in line with previous account history.

Naturally, "unusualness" must always be judged in the context of a specific bank account -- what may be "large" for one may not be so for another, and what may be a common financial transaction for one type of business may raise the alarm if it occurs on another account.

To give a fairly obvious example, a sudden receipt of a seven-digit amount in an account that for years maintained a modest saving of say US$200,000 is just not going to go unnoticed as its size stands out when compared to the previous account balance. Supporting documentation confirming the source of the funds will be sought by a vast majority of banks worldwide.

Nowadays, even the origin of such a small amount as say $100,000 may be questioned should it be received in a very new account. In some jurisdictions, "large amounts" are defined as those over $10,000!

Establishing an effective line of communication with your banker is the best line of defence.

If you are expecting a large incoming remittance, whatever "large" may mean in your own circumstances, be sure to talk to your banker before he finds out for himself by looking at your account. Giving an explanation as to how your new wealth came about may save you the trouble of having to produce documentary evidence later, and/or being reported to a Financial Intelligence Unit (FIU). Remember that your bank has strict due diligence procedures to follow, and thousands of people each year get reported even though their transactions are entirely within the law.

The same common-sense principles apply to large outgoing payments, or "unusual" frequency or out-of-the-ordinary patterns of transactions. Establishing an effective line of communication with your banker -- prior to the occurrence of any transfers that might be seen atypical -- is the best line of defence.

In fact, talking to your banker is crucial if your account is to be used for frequent incoming remittances that are subsequently followed by outgoing payments, or if your financial transactions involve offshore jurisdictions or countries on the FATF blacklists.

 


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