Unusual Activity Indicative of Human Trafficking

C

In this scenario, the bank compliance officer has implemented enhanced monitoring rules that have identified some unusual activity that may be indicative of human trafficking. The question asks which red flag should prompt additional transactional review.

Answer (C) "Cash deposits that occur in cities where the customer does not reside or conduct business" should prompt additional transactional review. This is because it is a common red flag associated with money laundering and other illicit activities, including human trafficking. Criminals often attempt to launder money through cash deposits in cities or regions where they do not conduct legitimate business activities or have known ties. This is known as "geographic arbitrage." They may do this in order to avoid detection, to commingle illicit funds with legitimate ones, or to "clean" the funds through a series of transactions.

Answer (A) "Wire transfer activity from countries with significant migrant populations" could also indicate potential money laundering or terrorist financing risks, but it is not specifically related to human trafficking. It may be necessary to review wire transfer activity from certain countries or regions that are known to be high-risk, but this would depend on a variety of factors, including the bank's risk assessment and the customer's profile.

Answer (B) "Cash deposits that occur in cities where the customer resides and conducts business" is less suspicious than Answer (C), but could still be indicative of potential illicit activity if the deposits are unusually large, frequent, or involve structured transactions. However, in this scenario, the question specifically asks for a red flag that occurs in cities where the customer does not reside or conduct business.

Answer (D) "Cash deposits that occur in cities where the customer does not reside or conduct business followed by same-day withdrawals" is also a red flag that could indicate potential illicit activity, but it is less suspicious than Answer (C). Same-day withdrawals could be a sign that the customer is attempting to move funds quickly or to avoid detection, but it is not as clear a red flag as cash deposits in locations where the customer has no legitimate business activities.

In conclusion, Answer (C) "Cash deposits that occur in cities where the customer does not reside or conduct business" is the most appropriate red flag that should prompt additional transactional review in this scenario.