A customer receives funds from one bank account and, within a few days, sends most of it out to a different account, with no clear business reason. Is that a red flag, and what should we look at?

Question

Accepted Answer

Yes, it can be a red flag, but the pattern alone is not proof of anything. The FFIEC lists this kind of pass-through activity as warranting closer scrutiny, so look at the surrounding facts before deciding whether it is suspicious.

What the guidance says:
- Many small incoming transfers or deposits, followed almost immediately by most or all of the funds being wired elsewhere in a way that is inconsistent with the customer's business or history, is listed as a red flag (FFIEC BSA/AML Examination Manual, Appendix F).
- So are funds transfers sent or received from the same person to or from different accounts (FFIEC BSA/AML Examination Manual, Appendix F).
- So are payments or receipts with no apparent links to legitimate contracts, goods, or services (FFIEC BSA/AML Examination Manual, Appendix F).
- A red flag is not by itself evidence of criminal activity. Closer scrutiny should help decide whether there is a reasonable business or legal purpose (FFIEC BSA/AML Examination Manual, Appendix F).

What we would look at:
- Whether it fits the customer. Compare the movement with what the customer told you about the account and with their past activity. The red flags above turn on activity that is inconsistent with the customer's business or history.
- Who owns the other accounts. Find out whose accounts the money came from and went to, and how they relate to the customer. Appendix F also lists unusual transfers among related accounts, or accounts with the same or related principals.
- Timing and repetition. A single movement reads differently from a repeated cycle. Appendix F also lists large deposits and withdrawals shortly after an account is opened, and an account with little activity that suddenly sees large deposits and withdrawals.
- A reason you can verify. Look for an invoice, contract or other explanation that ties the money to goods, services or a legitimate purpose, and note what you were told and what you confirmed.

Whether this activity is reportable is a decision for your BSA/AML officer, applying your SAR procedures to the full facts.

A customer receives funds from one bank account and, within a few days, sends most of it out to a different account, with no clear business reason. Is that a red flag, and what should we look at?

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