Identifying Red Flags for Money Laundering
Question
A popular restaurant in town has begun depositing less cash than it has in prior years. In a review of the customer's accounts, you notice that credit card receipts have increased with no explanation.
The account officer discovers that the restaurant has installed a privately-owned automated teller machine (ATM) onsite and has begun construction of a patio dining area.
Which red flag should trigger additional investigation?
Answers
Explanations
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The red flag that should trigger additional investigation in this scenario is the installation of a privately-owned ATM on the restaurant's premises.
The installation of a privately-owned ATM allows the restaurant to receive cash directly from customers, without having to deposit it into their bank account. This means that the restaurant may be able to bypass traditional banking channels, which could make it easier for them to conceal the true source of their funds. For example, they could be receiving cash from illegal activities such as drug trafficking, gambling or prostitution.
In addition, the lower cash deposits and increased credit card receipts may also indicate suspicious activity, but they do not necessarily indicate illicit activity on their own. For instance, a restaurant may have lower cash deposits if they have shifted to more electronic payments. Similarly, increased credit card receipts could be due to an increase in business, promotions or discounts.
The construction of the patio dining area may also indicate increased business, but it is not necessarily a red flag for money laundering or illicit activity. Therefore, it is important to consider the context of the situation and investigate all potential red flags.
Overall, the installation of a privately-owned ATM is the most significant red flag in this scenario, as it has the potential to facilitate money laundering and other illicit activities.
