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7/28/2019 NFIU Suspicious Transaction Reports
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
NFIU/EFCC
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Defining RiskCompliance risk is a combination of regulatory andreputational risks
Regulatory riskis the risk that the procedures implemented
by the entity to ensure compliance to relevant statutory,regulatory and supervisory requirements are not adhered toand/or are inefficient and ineffective
Reputational riskis the risk that the entity might beexposed to negative publicity due to the contravention of
applicable statutory, regulatory and supervisoryrequirements and/or providing a service that does notcomply with fit and proper industry standards
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Where Is Our RiskA banks risk profile
is determined byseveral factors;
GeographyCustomer baseTransactions
offeredDo Bank A and Bank
B have the same riskprofile?
Bank A: Based inLagos providingprivate banking
services to toppolitical officials.
Bank B: Based inGombe offering
savings accounts tosmall scale tradersand farmers.
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Where Is Our Risk
(contd.)
Money Laundering
Risk
Geographical
Risk
Customer
Risk
Services
Risk
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Where Is Our Risk
(contd.)First step is identifying money laundering risk facing thefirm, taking into account its customers, products andservices, delivery channels and geographical profile andassessing their probability and impact if they occur.
Banks collect information about customers, then file themaway!! Information should be used to build a profile of the customer
and assess level of risk. Identify high risk customers at account opening;
Is the customer in a high risk occupation, does the customer
operate a high risk business, does the customer require highrisk services.Verify, verify, verify. Customers do lie and you are liable.
Do you have the correct address, does the account activity fitthe customer.
Build a base-line. Scrutinize existing accounts to establish
what is normal especially for high risk activities.Does this customer fit the general pattern for his peers.
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Where Is Our Risk
(contd.)Customer A opens
and account an sayhe manufacturersindustrial chemicals,a site visitationindicates that hisoperational
address is in aresidential area. Isthis normal?
Customer B opens asalary account as acivil servant,however, hefrequently receivesinternational wiretransfers. What do
you do?
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Where Is Our Risk
(contd.)Measure levels of risk forcustomers and transactions bydeveloping a set of metrics.
How many high-risk customersand transactions are normal
for the institution given thegeographical profile?
How many customers areconsidered high-risk, normal orlow-risk?
What type of transactions areconsidered high-risk?
The risk profile is arrived bytaking these factors intoconsideration.
Customer A routinely makestransactions just below thereporting threshold.
Customer Bs accounts has ahigh frequency of deposits by
different individuals. Signatories on corporate
account owned by ABC Corp.are changed frequently.
Customer D makes significantand frequent deposits andwithdrawals into a savingsaccount.
Are any of these suspiciousacts?
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Where Is Our Risk
(contd.)Are high risk customers engaging in high risk
transactions?
Identifying such correlations is essential toidentifying risk.
Banks should conduct periodic reviews ofcustomers, transactions and look for
correlations.
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Where Is Our Risk
(contd.)A bank must monitor its customers activities. Monitoringmust be commensurate with the identified risk.
Processes must be tailored to specific risks. Applying thesame AML controls to all customers is simply not time or
cost effective.Do you apply the same CDD procedures to a politicianoperating a private banking account as a petty traderoperating a savings account?
Staff training to deal with risk should also be tailored.Customer facing staff will need greater training on
identifying suspicious transactions and behaviour than back-office staff.Banks will need to be proactive in protecting themselves
from threats. Identifying trends and vulnerabilities will allowthe bank to modify its risk mitigation processes.
A risk based approach allows the bank to tailor its approach.
It is not about new tools and processes but about usingexisting tools in the most effective way.
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High Risk Jurisdictions : Geographical
RiskCustomers or transactions from countries
that pose a high risk;
Countries subject to UN sanctionsCountries identified as having high levels of
corruption or other criminal activity(Transparency International CorruptionPerception Index, Financial Action Task ForceNon-Cooperative Countries and Territories List)
Countries identified as providing support forterrorist activities.
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High Risk CustomersSome occupations and businesses pose a higher
level of ML risk;Politically Exposed Persons (PEPs)
Cash intensive businesses such as casinos, currencyexchange, money transfer agentsNon-cash intensive businesses that generate substantial
amounts for certain transactions.Non-governmental and non-profit organisations
especially in poorly regulated environmentsDealers in high-value items such as estate agents,
jewellers etcAccounts run or operated by gatekeepers such as
accountants, lawyers especially where the identity of thebeneficial owner is not properly identified
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High Risk TransactionsCertain products and services should be
considered high risk;
New and innovative services, especially wherethe identity of the owner may not be properlyidentified such as electronic banking products
International and cross-border banking services
Private banking servicesProducts and services designed to preserve the
anonymity of the customer or to avoididentification and detection
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Risk Based Management of ML
RisksBanks must exercise some degree of judgement
in determining the level of risk posed bycustomers.Some variables which may determine the
perceived risk include;Levels of assets; unusually high levels of assets or
unusually large transactions compared to what isexpected from customers with similar profiles.
The level of oversight to which the customer is subjected.
A customer from a jurisdiction with weak AML controls(e.g country on FATF NCCTs list).Public listed companies may pose a lower ML risk.Duration of relationship. Customers with long-standing
relationships generally pose a lower risk.The use of intermediaries or other structures such as
shell companies indicate a higher level of risk
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Covering All The Bases: Risk
MitigationRisk mitigation is about choosing the right
measure to control risk and applying thesemeasures.
Involves risk monitoring by putting in placeappropriate systems and keeping up to datewith changes to customer risk profiles.
Documenting the process and ensuring the
integrity of the process are essential.
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Covering All The Bases: Risk
Mitigation(contd.)Banks are required to develop and
implement controls to mitigate the ML riskfrom customers and transactions
considered to be high risk.The bank should at the minimum consider
implementing;Increased levels of due diligenceEscalation of approval for the establishment of
business relationships to managementIncreased monitoring of transactions.Greater frequency of reviews
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
Although suspicious transaction is subjective,
a combination of the under listed indicatorswill give us a lead to fish out suspicioustransactions.
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
Large - scale cash transactions
Rapid off shore transfer of funds immediatelythey are deposited
Unrealistic business proceeds compared toclients profile
Unusual funds inflow into customers account
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
Cross-border travel to undertake simple
transaction (frequent demand for TCs)Settlement of Bad and Doubtful Debt by third
parties or without waiver request
Over/Under Valuation of Insured Assets
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INDICATORS OF SUSPICIOUSTRANSACTIONS
Unsatisfactory explanation by customer on
account activitiesRe-activation of dormant account with huge
amount
Unusual and complex method of purchasing
financial instrumentsAtypical account turn over compared to
clients profile
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INDICATORS OF SUSPICIOUSTRANSACTIONS
Deposits at various branches the same dayfor no logical reason
Having Numerous safe deposit Boxes atvarious Banks/Branches
Questionable rationale of underlying businessrelationships
Frequent demand for cash exchange of smalldenominations for higher ones
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
Attempt to avoid disclosing the actual
sender/beneficiary of fundsAttempts to avoid identifying final
beneficiaries of accounts (Trust/Nominees)
Unsatisfactory explanation for business to be
undertakenComplex and odd settlement for goods and
services (Payroll etc)
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INDICATORS OF SUSPICIOUSTRANSACTIONS
Large and/or rapid movement of funds
Possible client or his associates in relation toprevious crimes
Atypical or uneconomical fund transfer to orfrom foreign jurisdiction
Customer having many similar account typewith no justification
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INDICATORS OF SUSPICIOUSTRANSACTIONS
Last minute alteration on funds movement
instructionsHuge investments in low profit yielding
Money Market Instruments (TBs, CPs, etc)
Discounting of liquid assets at well below
prevailing market ratesHigh volume of split transaction or frequency
which is unjustifiable or unrealistic
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
Taking various Insurance cover for the sameAsset with different Insurance Firms
Transactions which do not have any economicjustification or lawful objectives
High credit turn over when the business is notthat lucrative
When Customer is in the habit of issuing dudcheques
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INDICATORS OF SUSPICIOUSTRANSACTIONS
Customer is introduced by a sister branch orhead office and customer avoids contact with
the branchWhere customer engages in business he is
not registered to undertake
Frequent transfer of funds to or from border
towns or branches
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INDICATORS OF SUSPICIOUSTRANSACTIONS
Customers source of fund is mainly fromforeign country without justification
Minors account with high volume oftransaction involving huge sums
Account operated on credit basis for a very
long time and having huge credit balance
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INDICATORS OF SUSPICIOUS
TRANSACTIONSAccounts with so many connected and
remittance accounts without reasonable
justificationsWhere customer frequently requests for
extensions and Amendments on EstablishedLetters of credit without reasonable
justification
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INDICATORS OF SUSPICIOUS
TRANSACTIONSWhere the customer ignores unutilized L.C
balances
Presentation of fake documents for Bankfacility
Where customers identification is discoveredto be fake
Where customer is acting as an agent andrefuses to disclose the identity of the Principal
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WHAT YOU SHOULD DO IF YOU DECIDE TOCARRY OUT A SUSPICIOUS TRANSACTION.?
Seek information from the customer as to theorigin and the destination of the funds, the aimof the transaction and the identity of the
beneficiary.Draw up a written report as quick as possible.
Ensure that the bank is not exposed to risk, inthe carriage of the transaction.
Take appropriate action to prevent thelaundering of the proceeds of a crime or anillegal act.
Send the report timely to the NFIU.
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INDICATORS OF SUSPICIOUS
TRANSACTIONS
THANK YOU
NFIU