Money laundering can happen in many ways and sometimes goes unnoticed.
That's why it’s important for companies to recognise the subtle red flags that could indicate something much bigger.
In this article, we walk through 22 red flags across different areas, with real-world examples, to help you strengthen your AML monitoring.
Wire transfer money laundering red flags
A wire transfer is an electronic method to send money from one bank account to another, often across borders.
Wire transfers are one of the most common methods for moving money, legally and illegally.
That's why it’s important to keep a close eye on patterns and deviations in transaction behaviours.
Effective transaction monitoring is often the first step toward uncovering hidden risks.
Unusual transactions
When transaction patterns deviate from the norm, it may be an early sign of money laundering. Some examples include:
- Accounts receiving multiple deposits that are quickly transferred to other accounts could suggest the account is being used as a pass-through.
- Accounts with high deposit activity but consistently low balances indicate money is moving through rapidly without settling.
- Deposits that are withdrawn or wired out within two days may signal that the account is not used for regular savings or business operations.
- Abrupt changes in account activity could suggest someone is repurposing a legitimate account for illegal activities.
- A lack of documentation regarding large sums entering or exiting the account should always be treated as a warning sign.
- Transactions involving countries with known money laundering issues require particular scrutiny, especially when large volumes are involved.
A strong monitoring system can quickly detect such irregularities and flag them for further investigation.
See how our tools can help you identify unusual patterns in transaction monitoring.
Suspicious sources of funds
The origin of funds is just as important as their movement. Typical red flags include:
- Deposits from many different individuals or companies, possibly indicating an attempt to obscure the origin through smurfing.
- Deposits from multiple geographic areas outside the client's normal business zone often point to attempts to evade pattern detection.
- Large amounts from various and unverified sources make tracing the money trail difficult.
- Significant cash deposits are always a red flag, particularly in an increasingly cashless country.
Curious about how Trapets can help you analyse these patterns? Learn more.
Red flags linked to client profiles
Understanding your client is fundamental to effective AML monitoring.
Certain behaviours and background information can immediately elevate the risk level of a business relationship.
A robust KYC process is key to spotting these warning signs early.
See how Trapets can strengthen your KYC process when onboarding customers and ongoing due diligence.
Withholding KYC information
If a client resists providing basic identity information or tries to bypass the KYC process, it’s a clear warning sign. Transparency is the foundation of a healthy business relationship.
Suspicious activity in background checks
Thorough background checks may reveal inconsistencies with what the client initially disclosed.
Histories tied to criminal activity, bankruptcies, or questionable dealings should be taken seriously.
Refusal to provide information on transactions
A client's reluctance to explain large transactions regarding amounts, counterparties, or purposes may signal an attempt to hide illicit activities.
