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Red Flags - Highest Risk Customers

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Question: 
What are the highest risk customers for money laundering and what are the specific red flags for unusual transactions within that customer group?
Answer: 

The FFIEC Exam Procedures (beginning on page 151) contains a list of the types of customers that the regulators have determined to be a higher risk for potential money laundering. These include non-resident aliens (NRAs), professional service providers (such as doctors, attorneys, accountants), PEPs, cash intensive businesses, etc. Your AML risk assessment must evaluate and assign a risk rating to the various high risk customers taking into account factors such as the length of time they have been a customer at your bank, reputation and history of handling their relationship. For example, even though a doctor is a professional service provider it does not mean that he or she is necessarily a high risk. Your particular customer might actually be a low risk based on the factors previously mentioned. A customer conducting business as a non-high risk, such as a private tutor, might actually be a high risk due to unusually frequent foreign wire activity involving large dollars. The exam procedures also offer tips on various types of red flags to identify potential money laundering. However, the best indicators can only be found by understanding what is normal for your type of customer within your market. What is normal for a convenience store in Miami, Florida is entirely different from the same type of convenience store in Miami, Texas.

First published on BankersOnline.com 2/02/09

First published on 02/02/2009

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