NFIU Suspicious Transaction Reports

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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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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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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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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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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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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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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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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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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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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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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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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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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TRANSACTIONS

THANK YOU

NFIU

NFIU Suspicious Transaction Reports

Documents

Transcript of NFIU Suspicious Transaction Reports