22 red flags for money laundering - with examples
Money laundering can happen in many ways and sometimes goes unnoticed. That's why it’s important to recognise the red flags that could indicate something much bigger.
Money laundering can happen in many ways and sometimes goes unnoticed. That's why it’s important to recognise the red flags that could indicate something much bigger.
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.
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.
When transaction patterns deviate from the norm, it may be an early sign of money laundering. Some examples include:
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.
The origin of funds is just as important as their movement. Typical red flags include:
Curious about how Trapets can help you analyse these patterns? Learn more.
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.
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.
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.
A client's reluctance to explain large transactions regarding amounts, counterparties, or purposes may signal an attempt to hide illicit activities.
AML solutions
Curious about how advanced monitoring can uncover hidden patterns? Discover Trapets AML solutions for transaction monitoring, customer due diligence, and screening.
While bad press is not proof of wrongdoing, it’s a reason to take a closer look, especially if allegations involve financial crimes.
Matching a client against a sanctions list poses an immediate risk and often leads to asset freezes and mandatory reporting.
Discover how Trapets can help you automatically screen against global sanctions lists.
Politically exposed persons (PEPs)
Clients with political ties are especially vulnerable to corruption risks, making them high-risk customers under international AML standards.
High-risk industries
Clients operating in industries like gambling, cryptocurrency, real estate, or cash handling should be monitored more closely, as these sectors are frequently exploited for money laundering.
Confusing ultimate beneficial ownership
When a company's ownership structure is deliberately complex or unclear, it could be an attempt to conceal true interests and activities.
Association with suspicious legal representatives
If a client is represented by attorneys or agents with a history of questionable dealings, the overall risk increases significantly.
Want effective tools to analyse ownership structures and hidden risks? Learn more about our screening solutions.
A high volume of chargebacks is a classic red flag for credit card abuse.
It may indicate that card transactions are being used to create fake sales and disguise illicit proceeds.
Continuous monitoring of chargeback levels is therefore an essential part of any AML strategy.
See how Trapets can help you monitor chargebacks and card transactions.
Cryptocurrencies offer new opportunities for rapid and anonymous value transfers, which can also be exploited for money laundering.
One key warning sign is an unusually high frequency of transactions, particularly if amounts are small and patterns appear intentionally erratic.
The real estate market is often used to legitimise illicit funds. Typical red flags include: