A bank maintains a relationship with a customer who owns a small bakery business.
Which customer action indicates potential money laundering?
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A. B. C. D.B
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Out of the four answer choices, the action that indicates the highest potential for money laundering is D. The customer recently wired a large amount to a foreign jurisdiction where family is located.
Here's why:
A. The customer continually makes regular cash deposits
Regular cash deposits can indicate a number of things, including legitimate business activity (such as daily sales) or personal cash savings. However, they can also be a red flag for money laundering if the customer is making deposits in small increments to avoid detection or if the deposits are not consistent with the customer's stated business activity. While regular cash deposits may be worth investigating further, they are not necessarily indicative of money laundering on their own.
B. The customer has multiple bank accounts at several locations
Having multiple bank accounts at several locations is not inherently suspicious, as many individuals and businesses maintain multiple accounts for a variety of reasons (such as convenience, access to different financial products, or to separate personal and business finances). However, having multiple accounts can also be a way to disguise the true source or purpose of funds, particularly if the customer is using different accounts to move money between jurisdictions or to conceal the movement of illicit funds. While having multiple accounts may be worth investigating further, it is not necessarily indicative of money laundering on its own.
C. The customer purchased property insurance that is twice the value of the business
While purchasing property insurance that is twice the value of the business may seem suspicious on its own, it is not necessarily indicative of money laundering. It is possible that the customer simply wants extra protection in case of a catastrophic event or loss. However, if there are other factors (such as unusually large cash deposits or other transactions) that suggest the customer is engaged in illegal activity, the insurance purchase could be a way to launder illicit funds. Again, while the insurance purchase may be worth investigating further, it is not necessarily indicative of money laundering on its own.
D. The customer recently wired a large amount to a foreign jurisdiction where family is located
Wiring a large amount to a foreign jurisdiction where family is located is a red flag for potential money laundering. This is because it is a common method for individuals to move illicit funds offshore, particularly if the recipient is located in a jurisdiction with weak or nonexistent anti-money laundering controls. The fact that the customer is sending money to family members adds an additional layer of suspicion, as it is possible that the family members are involved in or benefiting from the illegal activity. While it is possible that the wire transfer is for a legitimate purpose, such as supporting family members or investing in a legitimate business, it is important for the bank to investigate the transaction further to ensure that the funds are not connected to illicit activity.
In summary, while each of the answer choices could potentially be indicative of money laundering, the action with the highest potential for money laundering is D, as it involves a large wire transfer to a foreign jurisdiction where family is located.