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.

  1. Large or frequent cash transaction, either deposits or withdrawals.

  2. Suspicious activity based on transaction pattern, i.e.

    1. Account used as a temporary repository for funds.

    2. A period of significantly increased activity amid relatively dormant periods.

    3. "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.

    4. "U-turn" transactions, i.e. money passes from one person or company to another, and then back to the original person or company.

    5. Increased level of account activity on the first banking day after Hong Kong horse racing, normally Mondays and Thursdays, indicating illegal bookmaking.

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

    1. Shelf, or Shell companies.

    2. Company registered in a known "tax haven" or "off-shore financial centre".

    3. Company formation agent, or secretarial company, as the authorized signatory of the bank account.

    4. Money service operator.

    5. Casino.

      

  4. Currencies, countries or national of countries, commonly associated with international crime or drug trafficking or identified as having serious deficiencies in their AML / CFT regimes,
    - Countries or places which do not or insufficiently apply the Financial Action Task Force (FATF) Recommendations.

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

  6. 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 ).

  7. Countries or nationals of countries, commonly associated with terrorist activities or the persons or organizations designated as terrorists or their associates. Details can be found on the website about sanction on terrorists or their associates of the United Nations Security Council at https://www.un.org/sc/suborg/en

  8. Politically Exposed Persons (PEPs)
    The JFIU identifies and analyses STRs linked to foreign territories and foreign criminal assets held in Hong Kong. The JFIU also provides financial intelligence in support of Hong Kong law enforcement agencies and international partners. A Politically Exposed Person (PEP) is an individual who is or has been entrusted with prominent public functions, which could be exploited for financial gain or money laundering. These include heads of state, heads of government, ministers, members of parliaments or other high ranking civil or military officials and their close associates and family. The JFIU also monitors STRs to identify corrupt activity by PEPs within Hong Kong and instances of bribery and corruption committed by Hong Kong individuals and organisations situated overseas.

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.