Money laundering schemes can
vary widely.
Federal action to
curtail money laundering activities
once focused heavily on
identification and documentation of
large currency transactions. More
recently, anti-money laundering
efforts have focused on the use of
money transfers, both through bank
and non-bank money transfer systems,
and other means of moving funds.
Today, as money launderers become
more sophisticated, all types of
financial transactions are facing
greater scrutiny.
The following situations may
indicate money laundering or other
illegal activity. These lists are
not comprehensive, but they may help
MSBs recognize ways launderers and
other criminals may try to use them
to launder money.
Attempts to Evade BSA Reporting or
Recordkeeping Requirements
Customers may try to keep their
transactions just below the
reporting or recordkeeping
thresholds, such as:
A customer or group of customers
who attempt to hide the size of a
large cash transaction by breaking
it into multiple, smaller
transactions by, for example,
conducting the smaller transactions-
-At different times of the day.
-With different MSB cashiers on the
same day or different days.
-At different branches of the same
MSB on the same or different days.
A customer or group of customers
who conduct several similar
transactions over several days,
staying just under reporting or
recordkeeping limits each time. For
example, the customer may:
-Purchase money orders with cash
just under $3,000 over several days.
-Purchase traveler's checks with
cash just under $3,000 over several
days.
-Initiate multiple money transfers
to the same receiver, each transfer
in an amount under $3,000, over
several days.
A customer who is reluctant to
provide information needed for a
reporting or recordkeeping
requirement, whether required by law
or by company policy.
A customer who is reluctant to
proceed with a transaction after
being informed that a report must be
filed or a record made.
A customer who breaks down a single
large transaction into smaller
transactions after being informed
that a report must be filed or a
record made.
A customer who presents different
identification each time a
transaction is conducted.
A customer who spells his/her name
differently or uses a different name
each time he/she initiates or
receives a money transfer or
purchases traveler's checks.
Any individual or group that bribes
or attempts to bribe an MSB employee
not to file any required reporting
forms or not to create a record
entry required by law or company
policy.
Any individual or group that forces
or attempts to force an MSB employee
not to file any required reporting
forms or create a record required by
law or company policy.
A customer who receives payment of
multiple money transfers that appear
to have been purchased in a
structured manner organized in a
way to evade reporting and
recordkeeping requirements.
-By the same send customer, each
transfer in an amount just under
$3,000 (or other relevant
threshold).
-By multiple send customers
initiated at one MSB location within
minutes of each other, each transfer
in an amount just under $3,000 (or
other relevant threshold).
A customer cashing multiple
instruments (money orders,
traveler's checks, cashiers' checks,
foreign drafts) that appear to have
been purchased in a structured
manner (e.g. each in an amount below
$3,000).
Customers Who Provide Insufficient
and/or Suspicious Information
Individual and business customers
may try to evade providing required
identification, such as:
*An individual customer who is
unwilling or unable to provide
identification or information.
*An individual customer who provides
different identification or
information each time he or she
conducts a transaction.
-Different name or different
spelling of name.
-Different address or different
spelling or numeration in address.
-Different identification types.
*An individual customer without a
local-address, who appears to reside
locally because he or she is a
repeat customer.
*A legitimate ID that appears to
have been altered.
*An identification document in which
the description of the individual
does not match the customer's
appearance (e.g. different age,
height, eye color, sex).
*An expired identification document.
*An individual customer who presents
any unusual or suspicious
identification document or
information.
*A business customer that is
reluctant to provide complete
information regarding: the type of
business, the purpose of the
transaction, or any other
information requested by the MSB.
*A prospective business customer
that refuses to provide information
to qualify for a business discount
(or other preferred customer program
offered by the MSB).
Activity Not Consistent With the
Customer's Business or Occupation
Look for examples of inconsistent
customer activity, such as:
An individual customer conducts MSB
transactions in large amounts
inconsistent with the income
generated by the individual's stated
occupation.
A business customer engages in
transactions that frequently use
large bills when the nature of the
customer's business activity does
not justify such use.
An individual or business customer
cashes large numbers of third party
checks.
A customer makes cash purchases of
money orders, traveler's checks, or
other instruments inconsistent with
the customer's business or
occupation.
A business customer uses a means of
payment inconsistent with general
business practices (e.g., pays for
MSB services with traveler's checks,
money orders, or third party
checks).
A business customer sends or
receives money transfers to/from
persons in other countries without
an apparent business reason or gives
a reason inconsistent with the
customer's business.
A business customer sends or
receives money transfers to or from
persons in other countries when the
nature of the business would not
normally involve international
transfers.
Suspicious Activity
A SAR must be filed by a covered MSB
when the MSB knows, suspects or has
reason to suspect that the
transaction or pattern of
transactions is suspicious and
involves $2,000 or more. A
suspicious transaction is one or
more of the following:
Involves funds derived from illegal
activity, or is intended or
conducted in order to hide or
disguise funds or assets derived
from illegal activity.
Is designed to evade BSA
requirements, whether through
structuring or other means.
Appears to serve no business or
apparent lawful purpose, and the MSB
can determine no reasonable
explanation for the transaction
after examining all available facts.
Involves use of the money services
business to facilitate criminal
activity.
All MSBs should have a system or
procedure to ensure that SARs are
filed when appropriate. When an MSB
employee suspects a person is
laundering money, conducting
transactions to evade BSA
requirements, or conducting a
transaction that has no apparent
lawful purpose and for which no
reasonable explanation can be
determined, or involves use of the
money services business to
facilitate criminal activity, the
employee should report that activity
to his/her manager or to the MSB
compliance officer. Then, if the MSB
determines that a SAR should be
filed, it must file the SAR and keep
a copy of it for five years. Any
supporting documentation, such as
transaction records, must be
maintained with the copy of the
filed form and also kept for five
years from the date of filing the
report.
What are "Funds Derived from Illegal
Activity?"
The phrase "funds derived from
illegal activity" means the monetary
proceeds of a criminal act.
Example. A drug trafficker sells
drugs to a user for $500. The money
received from the drug purchaser,
the $500, is proceeds of the drug
sale and is "funds derived from
illegal activity."
What is a transaction that "Is
Designed to Evade BSA Requirements?"
Example. A customer conducting an
$11,000 cash transaction attempts to
bribe an MSB employee not to file a
CTR.
What is a Transaction that "Serves
No Business or Apparent Lawful
Purpose?"
Some transactions may be conducted
in such a way that they appear
unusual or suspicious. However,
additional facts, if known by the
reporting business, might disclose a
reasonable basis for what, at first,
appears unusual or suspicious.
Example. A customer, a retired
teacher, frequently sends and
receives money transfers of more
than $2,000 to and from many
different people. The MSB might at
first conclude that these
transactions are suspicious because
they appear to "serve no business or
apparent lawful purpose" and because
there does not seem to be a legal
source for these funds. However,
with more information, the MSB might
conclude that a business purpose
exists. For example, the retired
teacher might be regularly using an
Internet auction site to buy and
sell antique jewelry.
What is a transaction that "Involves
Use of the MSB to Facilitate
Criminal Activity?"
Example. An MSB suspects that a
customer is sending a money transfer
in order to fund a terrorist
organization.
It is important to note that size
alone, such as a large cash
transaction or money transfer,
should not be a determining factor
in the decision to file a SAR.
Factors that should contribute to
that decision, however, include the
following: the size, frequency and
nature of the transactions; the
MSB's experience with the customer
and other individuals or entities
associated with the transaction (if
any); and the norm for such
transactions within the MSB's line
of business and geographic area.
Red Flags
When a single factor signals that a
transaction is unusual and possibly
"suspicious," it should raise a "red
flag."
Examples of Some Common Red Flags:
Customer ID or Information
Customer uses false ID.
Two/more customers use similar IDs.
Customer alters transaction upon
learning that he/she must show ID.
Customer alters spelling or order
of his/her full name.
Transactions Below Reporting or
Recordkeeping Thresholds
Customer conducts transactions just
below relevant thresholds:
Currency exchanges just under
$1,000.
Cash sales of money orders or
traveler's checks of just under
$3,000.
Multiple Persons or Locations
Two or more customers working
together to break one transaction
into two or more transactions in
order to evade the BSA reporting or
recordkeeping requirement.
Customer uses two or more locations
or cashiers in the same day in order
to break one transaction into
smaller transactions and evade the
BSA reporting or recordkeeping
requirement.
Overt Illegal Customer Conduct
Customer offers bribes or tips.
Customer admits to criminal
conduct.
An MSB that correctly verifies and
documents a customer's identity is
more likely to recognize suspicious
activity that should be reported.
Unusual Activities
An individual customer purchases
products/services on a regular basis
but seems neither to reside nor work
in the MSB's service area.
A customer pays for MSB
products/services using musty bills
that have an unusual or
chemical-like odor.
A customer pays for MSB
products/services using money orders
or traveler's checks without
relevant entries on the face of the
instrument. (e.g., for money orders
with no payee, and for traveler's
checks with no signature or
countersignature).
A customer pays for MSB
products/services using money orders
or traveler's checks with unusual
symbols, stamps or written
annotations (such as initials) that
appear either on the face or on the
back of the instruments.
A customer purchases money
transfers, money orders, traveler's
checks, etc., with large amounts of
cash when the MSB does not require
payment in cash.
An individual or business customer
asks to purchase traveler's checks
or money orders in large bulk
orders.
A customer purchases a number of
money transfers, money orders, or
traveler's checks for large amounts
or just under a specified threshold
without apparent reason.
A customer starts frequently
exchanging small bills for large
bills, or vise versa, when the
customer does not normally use cash
as a means of payment.
A customer sends and receives money
transfers in equal amounts at or
about the same time.
A customer receives a number of
small money transfers and the same
day, or within several days,
initiates one or more send money
transfers to a person in another
city or country in about the same
amount.
A customer sends or receives
frequent or large volumes of money
transfers to or from persons located
in foreign countries, especially
countries listed as non-cooperative
jurisdictions.
A customer receives money transfers
and immediately purchases monetary
instruments prepared for payment to
a third party.
Changes in Transactions or Patterns
of Transactions
Be alert for changes in activity,
such as:
Major changes in customer behavior,
for example:
-An individual money order customer
begins to make weekly purchases of
money orders in the same amounts
(when previously he or she only
purchased money orders on pay day
for rent, utilities, etc.).
-An individual customer begins to
bring in large amounts of cash (when
previously he or she cashed his or
her paycheck to purchase instruments
or transfers).
Sudden and inconsistent changes in
money transfer send or receive
transactions.
Rapid increase in size and
frequency of cash used by a
particular customer.
Employees
Watch out for employee behavior,
such as:
An MSB employee whose lifestyle
cannot be supported by his/her
salary, which may indicate receipt
of tips or bribes.
An employee who is reluctant to
take a vacation, which may indicate
he/she has agreed, or is being
forced, to provide services to one
or more customers in violation of
law or company policy.
An employee who is associated with
unusually large numbers of
transactions in unusually large
amounts, which may indicate he/she
has agreed, or is being forced, to
provide services to one or more
customers in violation of law or
company policy.
Situations like those described in
this section often will be found,
upon further examination, to be
completely legitimate. By the same
token, other situations not
mentioned here might be suspicious
if they are inconsistent with the
normal activity of a particular
customer or employee. As an MSB or
MSB employee, you must make a
reasonable judgment.
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