Banks are financial institutions licensed to receive funds and provide loans to their customers. They also offer financial services like wealth management, currency exchange, etc. The Federal Reserve System controls banks in the U.S. As said in one of my articles, these institutions can close your account for several reasons, one of which is suspicious activity. If your bank flags your account because of suspicious activity, there is every tendency it’ll be frozen. But have you ever thought of how banks monitor suspicious activities?
Banks track suspicious activities by looking at the following criteria:
- Your account activities
- Owning numerous accounts
- Value of transaction made
- Nature of transaction initiated
- Client’s identity
I assume you must have one day heard a reporter talking about how someone was apprehended for a crime after his or her bank reported shady activity in the individual’s account. Or you may have heard of stories whereby someone’s account got frozen due to suspicious activity. If you have experienced any of the situations, I guess you might be intrigued to know how banks pull it off. How do they track shady activities? What are those factors or criteria’s they look at when scrutinizing one’s account for shady activities? If you are eager to know, you should keep your eyes glued.
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How Do Banks Track Suspicious Activity?
After the unfortunate 9/11 attacks that left many people dead and scores injured, many changes and upgrades were made to prevent a repeat. The security architecture of the U.S. was rejigged, and measures were set up to track the movement of illicit funds and report accounts with shady activities. One of those measures was the prompt closure of accounts that raised any red flag, regardless of how subtle.
Over the years, there have been countless cases of account closures due to suspicious activities. Sometimes, the suspicion may be mere suspicious and nothing more, while other times, the suspicion may turn out to be fact.
Below, we are going to take a look at how banks track shady activities. Knowing how they do this can help you avoid one of those unfortunate scenarios where your account is closed due to something you had no idea of.
Criteria Used to Track Suspicious Activity.
Your account activities:
Suppose your bank notices any anomaly in the transactions of your account when compared to your transaction history. In that case, it may close your account (temporarily, pending an explanation from you) for the reason of suspicious activity.
For example, if you usually spend $30,000 a month in multiple transactions using your debit card and all of a sudden, one day you made a transaction of $500,000, your bank will be alerted and may request for verification. Your account activities is a common way in which banks track shady activities.
Owning numerous accounts:
Many of us aren’t always satisfied with one account. For reasons best known to us, we are often compelled to open more account, sometimes for no good reason. However, before you proceed to open your second, third, or even fourth account, you should know that banks often keep a close watch on people which such tendencies. So don’t be surprised when your account is temporarily closed.
Value of transaction made:
There are certain guidelines regarding the value of transactions that seem suspicious. For instance, if the amount of any transaction is less than the reporting threshold amount, banks have a well-founded suspicion of under-reporting by any individual or company. On the other hand, if transactions initiated by an individual or a company don’t conform to his or her current financial status or standing, such transactions may raise suspicions.
Nature of the transactions initiated:
If you are fond of purchasing negotiable instruments such as draft, etc., your bank may call you in for questioning or sometimes shut your account temporarily pending your appearance or explanation.
Client’s identity:
When trying to validate your identity, banks will request documents like your address, including other details. As the account holder, you are required to provide the bank with authentic copies of whatever document they asked for. But, if, in any case, the bank finds out that the documents you provided them with misleading or false documents, or if they couldn’t verify it in time, suspicion may arise.
In addition, if a potential customer decides to open an account in the name of an already registered business, such a request may raise a red flag causing the bank to investigate for possible suspicious activity.
Finance is a very delicate and complex aspect, and a little carelessness on your part could result in massive damage to your reputation. As the number of financial crime rises, banks, including other financial institutions, are raising their alertness levels and integrating systems that are more effective in detecting the slightest of shady activities.
Always scrutinize your transactions to ensure that you aren’t flouting any rule. If possible, get a copy of the terms and conditions of your bank and digest it. You never know, such a minor act can save you from a lot of trouble in the future.
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Do Banks Report Suspicious Activity?
Everyone has who they take commands from or who they give reports to. In an office, you report to your boss or whoever is placed to supervise you. In school, you often report to your teacher. State governors report to the president. If your account was disabled for suspicious activity, I assume you may want to find out who your bank is required to report the case or development too. Do banks really report shady activities, or do they take actions on their own?
Banks report suspicious activities to the necessary body or organization before taking action. In the United States, banks report shady activities to FinCEN (Financial Crime Enforcement Network).
It is the duty of the FinCEN, a division of the United States Treasury, to carry out investigations on matters regarding a suspicious act reported by banks. If your account was flagged for suspicious activity, and you are sure that you are innocent, it is advised that you visit your bank ASAP to resolve the issue before it reaches the FinCEN.
