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Many compliance teams may find that applying AML or anti-money laundering detection rules is not straightforward.
This happens because there are too many risk factors and possible thresholds associated with their respective business models, customers, product ranges, etc.
Even so, there are some AML rules that should be common to nearly every compliance team. We’ve narrowed them down to eight.
Simply put, structuring is what happens when a fraudster makes a large number of transactions just below the reporting threshold.
With respect to AML rules, this means that pattern detection should be tailored to customer transactions that are slightly below the reported value imposed by the jurisdiction in which the company operates.
By doing this over a significant period of time, compliance teams can find relevant patterns that require further action.
Rules should be put in place to detect when customer details have changed before the major outbound payment.
There are two reasons behind this.
Scammers are trying to hide the path of the money, as there may be layering.
Scammers may be trying to gain access to dormant accounts and prepare before engaging in money laundering activities.
In tandem with this, the following guidelines may also be most important:
Transactions with immediate withdrawal of funds the moment they are received may be associated with criminal activity and should be monitored.
If the frequency of practice is set (e.g. every few days) the case is exacerbated.
In addition, dormant accounts may be used. Dormant accounts should have his AML rules associated with them triggering unusual levels of activity, high-risk jurisdiction transfers, changes in customer details, etc.
Unusual spending patterns are difficult to summarize in a single rule. This is because customers have different social status, income levels and, logically, types of spending.
Nevertheless, account takeovers do occur, so the criteria should be related to normal customer activity.
Therefore, a red flag should be detected when a deviation is observed.
Following this line of thinking, the following guidelines are very clear. Because at the end of the day, it’s also where the money goes.
If the money is moving to a high-risk country, it becomes clear that something could be on hand.
However, high-risk countries are not only those with high exposure to financial crime, but also those with high tax havens and banking secrecy.
Given the ever-changing political and economic situation, general risk levels are also constantly changing. This means that the list of high-risk countries needs to be constantly updated to reflect these changes.
Having such rules in place serves as an attempt to prevent money laundering practices that may arise under collusion. In other words, it actively seeks the circulation of funds through clusters of accounts.
The idea is to look for merchants who are paid by a limited number of consumers in places such as platforms where multiple buyers should be the rule rather than the exception.
It’s widely known that cash remains one of the preferred means of criminals, and inconsistent cash activity should always be a red flag.
The first step is to have a rule in place that triggers when a significant number of cash deposits are identified.
However, it’s important to keep your distance and cross-check with the customer’s behavior for discrepancies.
But don’t just look for cash because virtual assets have their challenges too.
Trading crypto assets may be a way to hide the origin of funds, but the more frequently cryptocurrencies are exchanged for fiat currencies and vice versa, the greater the potential for money laundering.
Virtual assets are usually not the preferred method of day-to-day trading, making them easy targets for schemes.
Monitoring the frequency of small transactions can help combat fraudsters.
It’s important to understand that these eight recommendations are a rough sketch of the much larger AML/CFT canvas.
Of course, different businesses, products, and users require different AML rules, and there is no “one size fits all” rule.
Still, narrowing down these eight general rules to each case will increase the chances of success for your AML team.
Many compliance teams may find that applying AML or anti-money laundering detection rules is not straightforward.
This happens because there are too many risk factors and possible thresholds associated with their respective business models, customers, product ranges, etc.
Even so, there are some AML rules that should be common to nearly every compliance team. We’ve narrowed them down to eight.
Simply put, structuring is what happens when a fraudster makes a large number of transactions just below the reporting threshold.
With respect to AML rules, this means that pattern detection should be tailored to customer transactions that are slightly below the reported value imposed by the jurisdiction in which the company operates.
By doing this over a significant period of time, compliance teams can find relevant patterns that require further action.
Rules should be put in place to detect when customer details have changed before the major outbound payment.
There are two reasons behind this.
Scammers are trying to hide the path of the money, as there may be layering.
Scammers may be trying to gain access to dormant accounts and prepare before engaging in money laundering activities.
In tandem with this, the following guidelines may also be of paramount importance:
Transactions with immediate withdrawal of funds the moment they are received may be associated with criminal activity and should be monitored.
If the frequency of practice is set (e.g. every few days) the case is exacerbated.
In addition, dormant accounts may be used. Dormant accounts should have his AML rules associated with them triggering unusual levels of activity, high-risk jurisdiction transfers, changes in customer details, etc.
Unusual spending patterns are difficult to summarize in a single rule. This is because customers have different social status, income levels and, logically, types of spending.
Nevertheless, account takeovers do occur, so the criteria should be related to normal customer activity.
Therefore, a red flag should be detected when a deviation is observed.
Following this line of thinking, the following guidelines are very clear. Because at the end of the day, it’s also where the money goes.
If the money is moving to a high-risk country, it becomes clear that something could be on hand.
However, high-risk countries are not only those with high exposure to financial crime, but also those with high tax havens and banking secrecy.
Given the ever-changing political and economic situation, general risk levels are also constantly changing. This means that the list of high-risk countries needs to be constantly updated to reflect these changes.
Having such rules in place serves as an attempt to prevent money laundering practices that may arise under collusion. In other words, it actively seeks the circulation of funds through clusters of accounts.
The idea is to look for merchants who are paid by a limited number of consumers in places such as platforms where multiple buyers should be the rule rather than the exception.
It’s widely known that cash remains one of the preferred means of criminals, and inconsistent cash activity should always be a red flag.
It starts with having a rule in place that triggers when a significant number of cash deposits are identified.
However, it’s important to keep your distance and cross-check with the customer’s behavior for discrepancies.
But don’t just look for cash because virtual assets have their challenges too.
Trading crypto assets may be a way to hide the origin of funds, but the more frequently cryptocurrencies are exchanged for fiat currencies and vice versa, the greater the potential for money laundering.
Virtual assets are usually not the preferred method of day-to-day trading, making them easy targets for schemes.
Monitoring the frequency of small transactions can help combat fraudsters.
It’s important to understand that these eight recommendations are a rough sketch of the much larger AML/CFT canvas.
Of course, different businesses, products, and users require different AML rules, and there is no “one size fits all” rule.
Still, narrowing down these eight general rules to each case will increase the chances of success for your AML team.
