A customer living in a high-risk jurisdiction makes frequent, large cash deposits at a bank. The same customer sends small wire transfers to unrelated parties in other high-risk jurisdictions.
What are two red flags that may indicate money laundering? (Choose two.)
Click on the arrows to vote for the correct answer
A. B. C. D.CD
https://aml-cft.net/library/banks-amlcft-red-flags/The correct answers to the question are B and C.
Explanation:
Money laundering is the process of concealing the true source, ownership, or control of illegally obtained money by passing it through legitimate financial channels. To detect potential money laundering activity, financial institutions, such as banks, should look for red flags that may indicate suspicious transactions. In this case, the customer is living in a high-risk jurisdiction and making frequent, large cash deposits at the bank. Additionally, the customer is sending small wire transfers to unrelated parties in other high-risk jurisdictions.
Here's an explanation of why options B and C are red flags:
B. The client resides in a high-risk jurisdiction: A high-risk jurisdiction is a country or geographic area with a higher probability of financial crime, such as money laundering or terrorist financing. This means that transactions involving customers who reside in high-risk jurisdictions are more likely to be suspicious. Therefore, the fact that the customer resides in a high-risk jurisdiction is a red flag.
C. Wire transfers are to high-risk jurisdiction: Wire transfers to high-risk jurisdictions are also a red flag as they could indicate that the customer is trying to move funds to a location where it may be easier to hide or launder money. These transactions could be part of a larger scheme to move illicit funds across borders, making them difficult to trace.
A. The bank allows cash deposits: The fact that the bank allows cash deposits is not a red flag in itself as cash deposits are a common transaction. However, if the customer is making frequent, large cash deposits without a clear explanation of the source of the funds, it could indicate potential money laundering activity.
D. Large cash deposits are from a high-risk jurisdiction: While it is true that large cash deposits from a high-risk jurisdiction could indicate potential money laundering activity, the scenario described in the question does not provide information about the source of the cash deposits. Therefore, it is not a valid red flag in this case.