Overpaying Loans AML Risk

Posted By: JessZ

Overpaying Loans AML Risk - 06/26/17 12:48 PM

Would it be possible for someone to take out a loan, overpay it, and use the refund to launder money? (Not including credit card payments). Doing research for my manager--we both assumed that's a possible scheme, but I can't find anything about it. Also, if yes, is there any regulation of it?
Posted By: Daisy Doodle

Re: Overpaying Loans AML Risk - 06/26/17 01:27 PM

I think a lot of systems prevent or restrict credit balances on loan or credit card accounts. For AML and operational reasons.
Posted By: one deer

Re: Overpaying Loans AML Risk - 06/26/17 03:26 PM

On our system it is unlikely/impossible as we have set a $3 variance above or below the actual payoff amount; you cannot even post the payoff to the loan if out of variance it rejects immediately.
Posted By: fmissle

Re: Overpaying Loans AML Risk - 06/26/17 07:08 PM

Our system will not allow a paymen to a loan (closed or open ended) which would make the principal less than 0.00.
Posted By: Princess Romeo

Re: Overpaying Loans AML Risk - 06/26/17 08:48 PM

IMHO - it would have to be a heck of an overpayment in order to be money laundering - OR, there would have to be a LOT of loans with similar ties that have overpayments. Otherwise, if someone overpays a loan by, lets say, $200 - that is not a very efficient way of laundering money. Now if they overpaid it by $20,000, then you have something to look into.

I accidently overpaid a revolving card balance (I had automatic bill pay set up on my end and didn't stop it in time after the balance was reduced to zero), so there could be a number of reasons why an account overpaid.
Posted By: PrimeTime

Re: Overpaying Loans AML Risk - 06/27/17 01:08 PM

I'd also look into the method of overpayment -- specifically if the loan were overpaid with cash, the individual would receive a clean check back from the institution for the overpayment, successfully washing the funds.

Like Princess Romeo mentioned though, it would have to be a rather significant volume to be efficient laundering.
Posted By: rlcarey

Re: Overpaying Loans AML Risk - 06/27/17 01:27 PM

Typically, money laundering is completed through the use of an open-end account - large purchases and cash payments. Closed-end, as others have said, would be pretty tough.
Posted By: JessZ

Re: Overpaying Loans AML Risk - 06/27/17 04:32 PM

Thanks everyone!