Joint Financial Intelligence Unit (JFIU)

	How do identify a Suspicion?
	When to Submit a STR?
	How to Submit a STR?
	What to Report in a STR?

How do identify a Suspicion?

An effective systemic approach to identify suspicious financial activity may safeguard you and your institution, business or profession from the risk of being involved with terrorist financing and money laundering crimes. Consider the “SAFE” approach which may assist you in legal compliance and staff training.

Examination of the STR's received by JFIU reveals that many reporting institutions do not use the system outlined above. Commonly, institutions make a STR merely because a suspicious activity indicator has been recognized, i.e. only step (1) of the systemic approach is followed, steps (2), (3) and (4) are not followed. This failure to use the systemic approach leads to a lower quality of STRs.

Each of the four steps of the systemic approach to suspicious activity identification are discussed in more detail in the following paragraphs.

Screen the account for suspicious indicators: Recognition Of A Suspicious Activity Indicator Or Indicators

The recognition of an indicator, or better still indicators, of suspicious activity is the first step in the suspicious activity identification system. The following are some of the suspicious activity indicators most commonly associated with money laundering in Hong Kong.

The following are some of the suspicious activity indicators most commonly associated with money laundering in Hong Kong.

Large or frequent cash transaction, either deposits or withdrawals.

Suspicious activity based on transaction pattern, i.e.

a.	Account used as a temporary repository for funds.
b.	A period of significantly increased activity amid relatively dormant periods.
c.	"Structuring" or "Smurfing" i.e. many lower value transactions conducted when one, or a few, large transactions could be used. Seen particularly in incoming remittances from
	countries with value based transaction reporting requirements, e.g. frequent remittances of just below AUD$10,000 from Australia, or US$10,000 from USA.
d.	"U-turn" transactions, i.e. money passes from one person or company to another, and then back to the original person or company.
e.	Increased level of account activity on the first banking day after Hong Kong horse racing, normally Mondays and Thursdays, indicating illegal bookmaking.

Involvement of one or more of the following entities which are commonly involved in money laundering,.

Shelf, or Shell companies.

Company registered in a known "Tax haven" or "Off-shore financial centre".

Company Formation Agent, or Secretarial Company, as the authorized signatory of the bank account.

Remittance Agent or Money Changer.

Casino.

Currencies, countries or national of countries, commonly associated with international crime or drug trafficking or identified as having serious deficiencies in their anti-money laundering regimes,

-	Countries or places which do not or insufficiently apply the Financial Action Task Force (FATF) Recommendations.

Customer refuses, or is unwilling, to provide explanation of financial activity, or provides explanation assessed to be untrue.

Activity is incommensurate with that expected from the customer considering the information already known to you about the customer and the customers previous financial activity.( For personal accounts consider customers age, occupation, residential address, general appearance, type and level of previous financial activity. For company accounts consider type and level of activity ).

Countries or nationals of countries, commonly associated with terrorist activities or the persons or organizations designated as terrorists or their associates. The latest consolidated list pursuant to the United Nations Security Council Resolutions 1267 (1999), 1333 (2000) and 1390 (2002) can be found on their website at www.un.org/docs/sc/committees/1267/1267ListEng.htm

Politically Exposed Persons (PEP)
PEPs are individuals holding important positions in governments or public sectors. It has been alleged that some PEPs in some overseas countries are involved in corruption and abuse of public funds.

Training programmes to raise and maintain staff awareness in the recognition of suspicious activity indicators are vital if this stage of the suspicious activity identification system is to be effective. A list of "best practices" for training of bank staff in the identification of suspicious activity indicators can be found here. Although designed for bank staff, many of these "best practices" are equally applicable to other financial institutions and Designated Non-Financial Businesses and Professions.

Unfortunately, merely training staff in the recognition of suspicious activity indicators is not enough to ensure that all types of indicators will be recognized. The rapid increase in automated services reducing face-to-face dealings between staff and customers, and money laundering methods such as "Structuring" undermine the ability of staff to recognize suspicious activity indicators.

Additional methods of monitoring customer activity for indicators of suspicious activity are therefore necessary. Click here to see a list of recognized methods for identification of suspicious activity indicators. Again, these methods were identified for use by banks but many are applicable to other financial institutions and Designated Non-Financial Businesses and Professions.

Next Step


2007© \| Important Notices	Last revision date: 07 February 2007