Types of Transactions Requiring Investigation
Question
In the summer, an institution identifies anti-money laundering concerns regarding a customer's account activity. The customer, an ice cream parlor, has deposited a lot of checks drawn on banks in foreign countries, sent large number of high dollar international wires to different countries, made cash deposits of a few hundred dollars every few days and written multiple checks for a few hundred dollars to the same dozen payees every two weeks.
Which two transaction types warrant investigation? (Choose two.)
Answers
Explanations
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A. B. C. D.BD
The two transaction types that warrant investigation in the given scenario are:
B. The wires to foreign countries D. Checks drawn on banks in foreign countries
Explanation: The activity of the ice cream parlor appears suspicious due to multiple factors such as depositing a lot of checks drawn on banks in foreign countries, sending large numbers of high dollar international wires to different countries, making cash deposits of a few hundred dollars every few days, and writing multiple checks for a few hundred dollars to the same dozen payees every two weeks.
Checks drawn on banks in foreign countries and the wires to foreign countries are considered high-risk transactions in the context of anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. These transactions may involve the movement of funds to countries that are high-risk for money laundering or terrorist financing, or to countries that are subject to sanctions or embargoes. Hence, it is important to investigate the source of funds and the ultimate beneficiaries of these transactions to ensure that they are not related to any illicit activity.
Repeated checks to the same payees are also considered suspicious and warrant further investigation, but this transaction type is less concerning than the wires to foreign countries and checks drawn on banks in foreign countries. This transaction type may indicate possible check-kiting or check-cashing schemes, which are often used to launder money or commit other financial crimes.
Regular cash deposits are also a red flag for AML, but they are less concerning than the other transaction types in this scenario. The frequency and amount of cash deposits may trigger reporting requirements under AML regulations, but on their own, they may not necessarily indicate illicit activity. However, it is still important to investigate the source of the cash deposits to ensure that they are not related to any criminal activity.
