Are AML investigators solely responsible for the financial crimes committed in the Financial institutions or are there some other factors involved too? They are not the sole responsible for any financial crime, but still they play a very important role in combating and preventing money laundering and other crimes. Because they are responsible for closely monitoring the transaction, detecting suspicious ones, and reporting it to the relevant department to ensure that compliance efforts are not being compromised in an organization.
Another factor that no one can deny is the continuous laundering tactics from the criminals to avoid the detection process. and for AML investigators, this challenge is crystal clear. But how to cater to these techniques, is what the AML investigators are hired to spot the red flags in a sea of seemingly normal transactions. Though there are many factors to consider, the investigator’s detective skill and knowing what exactly to look for in a transaction matter a lot. In this blog, we will discuss the top techniques and tips for AML analysts that could be beneficial for them to spot suspicious transactions like Pro.
Top 5 Techniques for AML Investigators to Detect Money Laundering Red Flags
- Don’t just Rely on normal Transaction Patterns.
Criminals always try to launder money by hiding the ordinary transaction pattern. So, for an AML investigator, first, it is necessary to understand all the patterns that come under the normal transactions in different industries. And then make sure no unusual transactions are being made. For example, watch for a small business suddenly starts making a large transaction that does not align with its usual business activities. Or you see despite the smaller business earnings, the owner suddenly makes larger transactions in a shorter time. This could be a sign of money laundering.
2. Pay Attention to High-Risk Jurisdictions and Counterparties
There are dozens of states, countries, and areas whose regulatory bodies list them as the jurisdictions with weaker AML regulations and are prone to money laundering. So, for AML investigators it is necessary to grab comprehensive knowledge about these jurisdictions and watch wisely the transactions that involve such countries or regions that are listed as the higher risk areas. For that investigators need to closely monitor the cross-border transactions. Customers suddenly start sending or receiving money from such countries. And also investigate the other party who is receiving or sending the money to your clients. This will help you to identify the risk level the one is posing for money laundering.
3. Look for Structuring and Smurfing Activities
Smurfing and structuring are the most common techniques of money laundering and analysis can’t take it lightly. Because criminals try to break down large amounts into smaller ones to move money without the fear of detection. Therefore, if you as an AML investigator see that multiple transactions are being made under the threshold. For example, a customer making a 9,000-dollar transaction multiple times to avoid detection indicates that there is something fishy that needs to be investigated.
Another thing to look for are the customers who have opened multiple accounts within the same institution or across different branches, and regularly conduct transactions just below reporting thresholds. This may be an attempt to structure deposits or withdrawals in a way that avoids detection.
4. Identify the Use of Shell Companies and Complex Ownership Structures
Why would people establish too many companies, if there is no use for them, no physical appearance, no production house nor giving any services? Don’t these questions arise the suspects over their creation? Though they are, by law, not illegal, still they are mostly used for tax evasion, and money laundering purposes.
Therefore, You need to pay detail intention to the corporate clients that have ambiguous ownership structures and are unable to declare clear business activities. So, be alert to transactions that involve multiple steps or transfers between entities that do not have an apparent business relationship.
5. Understand Unusual Use of Financial Instruments
Criminals will never hesitate to use all possibly available instruments for money laundering. Therefore, If a customer frequently purchases bank drafts, money orders, or cashier’s checks without a legitimate reason, AML investigators must consider it as an attempt to exploit the institution for money laundering and other financial crimes.
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