SUSPICIOUS TRANSACTIONS | AML KYC CERTIFICATION
In this post, we will talk about the suspicious transactions as per PMLA for latest IIBF Exams of AML & KYC 2024.
As we know that IIBF organizes many certification exams for the bankers of its member banks, AML KYC i.e. Certificate Examination in Anti-Money Laundering & Know Your Customer is one of them. It’s also one of the important exams as all the bankers are expected to have professional competence to detect & report on money laundering activities, especially as the level of position increases.
So, here we are with the latest notes from the syllabus prescribed by IIBF for the KYC AML Exam candidates. As the IIBF administer this exam throughout the year, but candidates are always expected to be updated with the latest amendments/revisions relevant in this field.
And Learning Sessions also provides the candidates with latest & updated notes & classes that form the part of the latest Study material of AML & KYC Examinations 2024.
If you want to access the latest AML KYC Study materials i.e. Lectures, mock tests, previous year questions etc, then
- Download iOS App: My Institute (Code: gegkt) or
- Exam Materials visit: iibf.info
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So, let us begin with the KYC topic from the latest prescribed Syllabus 2024 i.e. SUSPICIOUS TRANSACTIONS
WHAT ARE SUSPICIOUS TRANSACTIONS?
So, first, let us understand the meaning of suspicious transactions.
As per PMLA rule 2 (g) means suspicious transaction
- a transaction, whether in cash or not, that gives rise to a reasonable suspicion in a person acting in good faith that it may involve the proceeds of crime, or
- appears to have been made under circumstances of unusual or unreasonable complexity or
- appears to have no economic rationale or bonafide purpose
- raises reasonable suspicion that it may involve the financing of terrorist-related activities
So, banks must consider indicators of suspicion when determining whether or not a transaction is suspicious. We have the Indicative lists of these indicators right below: (These basically tells us the activity leading to the suspicions of)
- Account used for lottery fraud: Complaints were received about a bank account used to receive money from victims. Deposits at multiple locations followed by instant cash withdrawals using ATMs. The account owner has not provided any valid explanation.
- False Identity: During the customer verification process, identification documents were found to have been forged. The account owner was not traceable.
- Doubts about the real beneficiary of the account: The customer is not aware of the transactions on the account. The transactions did not match the customer profile.
- Account of persons under investigation: The customer has been reported in the media as being under investigation.
- Account used for cybercrime: Cybercrime complaints have been received against the customer. No valid explanation of transactions from the account holder was received.
- Incorrect address: The welcome package was returned because the person was not staying at the given address or the address details provided by the account holder were found to be false. The account owner was not traceable
- Suspicious activity of a customer from a high-risk country: Cash deposited into a bank account in different cities on the same day. Account holder citizen of a high-risk country with known cases of drug trafficking.
- Wanted Criminal Account: The account holder’s name and other criteria (Date of Birth / Father’s Name / Nationality) were the same as the person on the crime watch list.
- Questionable IPO Investment: Large number of accounts involving a joint promoter or authorized signatory. Accounts used for multiple investments in IPOs of different companies.
- Unexplained transfers between multiple accounts: A large number of related accounts with substantial transactions between accounts without any economic justification.
- Suspicious use of an ATM card: Frequent deposits of cash into the account followed by ATM withdrawals at various locations. No valid explanation.
- Unexplained Dormant Account Activity: A sudden spike in dormant account activity. The customer could not provide a satisfactory explanation of the transactions.
- Unexplained large-value transactions that are inconsistent with the client’s apparent financial situation: Large-value transactions in an account that typically has low-value transactions. The account owner has not provided any valid explanation.
- Questionable source of payment for credit card purchases: The credit card is first loaded with significant cash and then used to make the expenses. Cumulative payment during the year was outside known sources of income.
- Questionable use of the safe: The safe is often operated according to the client’s financial situation
- Questionable withdrawal of foreign transfers: Foreign transfers are collected in cash immediately. No valid explanation.
- Questionable source of cash deposited in a bank account: Frequent cash transactions with a value just below the reporting threshold. Cash transactions split between accounts to avoid reporting. No valid explanation was given.
- Suspicious bank account cash withdrawals: Deposited checks of large value followed by immediate cash withdrawals.
- Unexplained account activity contrary to declared trade: Transactions on the account contrary to what would be expected from the declared trade. The customer could not provide a satisfactory explanation.
- Questionable source of foreign transfers to bank account: Depositing series of bills purchased from Exchange House abroad. Sudden deposits into a dormant account immediately followed by withdrawals.
- Suspicious remitter of foreign remittances: The name and other details of the remitter match the person on the watch list.
- Questionable recipient of foreign remittances: The name and other details of the recipient match the person on the watch list.
BANK’S SUSPICIOUS TRANSACTION REPORTING (STR) GUIDELINES
In determining suspicious transactions, banks should follow the definition of suspicious transaction contained in the PMLA Rules as amended from time to time.
Note: It is likely that in some cases transactions are abandoned or aborted by customers when they are asked to provide some details or provide documents. So, banks are clarified here that they should report all such attempted transactions in STR, even if not completed by customers, regardless of transaction amount.
So, why is transaction tracking so important?
- It is an important first step in any financial institution’s AML and CTF procedures.
- The ability to detect a suspicious transaction could potentially prevent criminals from laundering thousands or millions of dollars. No organization wants to get caught up in a money laundering scandal.
- The implementation of transaction monitoring gives confidence to regulators and banking partners. It shows that the financial institution takes AML and CTF regulations seriously and does everything in its power to prevent criminal activity. This helps build the trust between new and existing partners.
- Transaction monitoring also allows financial institutions to take a risk-based approach. This means that they are able to identify and manage the potential risk that exists with clients. The customer’s risk level is determined by a number of factors, such as the type of his job, country of residence, etc.
- Once a financial institution determines a customer’s risk level, it can adjust its monitoring of that customer.
The Financial Action Task Force (FATF) sets standards that are linked to AML and CTF procedures and recognizes the following factors as determining the appropriate scope of AML/CTF controls:
- The diversity of the financial institution’s operations, including where it operates geographically
- The nature, complexity & scale of the business
- The extent to which the financial institution trades through intermediaries, third parties or without face-to-face access (if any)
- Distribution channel
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