Money laundering harms the economy of a country. For this reason, bank regulators all over the world have created stringent rules designed to curb the act of funds laundering and the damaging effects it has on the economy and the financial sector. Today banks have systems that enable them to track suspicious transactions linked with this illegal act. Once a transaction is made, a bank can determine, to a fairly good extent, if it’s tied to funds laundering or not. How do banks classify suspicious transaction in money laundering?
Suspicious transactions in money laundering are those transactions that are out of the ordinary. Such transactions usually involve the movement of a huge amount of money in one or multiple batches. There are other factors used to classify if a transaction is linked with this illegal act or not.
Funds laundering is a severe crime that attracts an average jail time of 67 months, depending on the severity of the case. If, for instance, the culprit was laundering money for a terrorist group, you should expect the jail time to be longer due to the severity of the crime. Most crimes are financed with money transferred via banks. Knowing this, banks in the US and other parts of the world have measures designated to track transactions linked with funds laundering. There are many factors that are considered while scrutinizing transactions. In this article, we’ll look at some of those factors.
How Do Banks Track Suspicious Activity?
What Is a Suspicious Transaction in Money Laundering?
Money laundering is an illegal trade that has helped many people become rich overnight. This act, which usually comes with severe consequences, has thrived for several decades. Year upon year, bank regulators in the US and other parts of the world are on the lookout for strategies that could help detect and end the blossoming funds laundering business, which has becomes a virus in the economy.
Banks, financial intuitions tasked with managing their customer’s money and facilitating tractions are the best shot at detecting and ending the widespread issue of funds laundering.
Over the years, we have heard of countless stories of individual’s account being clocked due to funds laundering allegations. Most times, these people aren’t apprehended due to the policing skills of those in police uniforms or the FBI. They are usually apprehended due to the sheer effort of the banks who boast of systems that detect suspicious transactions linked with the laundering of funds. As we progress, I’ll highlight some of those transactions.
What is Money Laundering?
Money laundering is a household name and a pervasive crime in several parts of the world. I bet many of us have heard of this term probably in movies, on the news or on the internet. But how many of you know what funds laundering really is? A few, I guess. Let’s take a concise look at what funds laundering is for those who don’t have an idea.
It is the illicit act of making huge amounts of money generated by criminal activity, like drug trafficking or terrorist funding, seem to come from a legit source. In other words, funds laundering is the act of making ill-gotten funds appear like legitimate business profits. The funds derived from the illicit act are deemed dirty or illegal, and the process “launder” makes it appear legal or clean.
Funds laundering is a very server financial crime that is leverage by bigwigs and common criminals. In order to curb or reduce the upsurge of this illegal act, many financial companies and institutions have anti-money laundering (AML) policies put up to trace and stop this widespread act.
Having understood what money laundering (ML) is, let us take a look at the suspicious transactions in this act. How do banks discover this act? What triggers a banks alert system when a specific transaction linked with ML is initiated?
Suspicious Transaction in Money Laundering:
Below are transactions or criteria’s that trigger banks system and forces them to scrutinize your account for the possibility of this illegal act.
Unusual Transactions:
If you often maintain a certain routine of withdrawing around $1,000 per week, then all of a sudden, you withdraw $5,000 five times on a single day, your bank will see such act as abnormal and may link it to a possible ML act. Wouldn’t you be curious if you were in the shoes of the bank?
Of course, banks wouldn’t conclude immediately. You’ll be invited for questioning, and the bank will carry out its investigation.
Big Cash Transactions:
Banks often keep an eye on those transactions (be it deposit or withdrawal) that involve big cash. For instance, a deposit or withdrawal of $500,000 will surely alert your bank, who would be keen to know the origin of the funds, especially if the money doesn’t match your financial or job status.
Funds laundering often involves the transfer of or the act of depositing huge funds. So, you shouldn’t blame a bank for the eagerness to know the source of such funds, as sometimes they are somehow linked to a crime.
Irregular Account Movement:
Your bank will be alerted when funds are suspiciously moved through multiple accounts. Such an act isn’t regular and will surely get banks sniffing around, trying to determine the source of the funds.
Also, if an individual is always fund of withdrawing huge funds sent in an account immediately, banks may want to poke their noses into the affairs of such individual.
Will Freezing Card Stop Pending Transactions?
How Do You Identify Suspicious Transactions?
If you work in a financial institution or if you operate a fintech business, it is essential that you know how to detect suspicious transactions. In fact, as an average individual, this ability can come in handy. It can save you from being dragged into an issue you know nothing about. Banks look at some criteria to determine if a transaction is suspicious or not. What are these criteria? How do you identify a suspicious transaction?
These criteria can help you determine if a transaction is suspicious or not:
- If a customer conducts several transactions in a day
- Funds are huge
- Huge funds are transferred from an account that has been docile for a while
- Anytime huge funds deposited into an account is withdrawn immediately
There are other ways to identify such types of transactions. Ensure you contact your bank or speak with a financial expert for more details.
