Transaction monitoring is one of the most critical steps in the customer due diligence process, and it allows regulated entities to keep a check on suspicious transactions and mitigate money laundering and financial crimes.

However, to ensure that transaction monitoring is robust, an effective transaction monitoring program must be developed.

The first step in developing the program is conducting an enterprise-wide risk assessment to identify the risks regulated entities face from customers, products, and services and adopt the risk-based approach.

The second step is to define the transaction monitoring red flags. These red flags and risk indicators will help correctly identify suspicious transactions during ongoing monitoring. While defining these red flags, the business must consider the evolving trends and typologies associated with the industry in which it operates.

An independent AML audit is necessary as per the UAE’s anti-money laundering laws. While the business is obliged to conduct an AML audit, there are several benefits it provides to the entity.

When you conduct an internal AML audit (which is not independent of the AML function), there is a chance that the internal AML compliance department will miss out on covering all aspects and be influenced by internal factors.  On the other hand, independent AML audits provide the business with an honest view that is free from any internal influence.

Based on the independent AML auditor’s opinion, the AML compliance department can make changes to the existing policies, procedures, and controls. This also allows the business to update the AML compliance framework with the latest regulatory requirements. For instance, if the government has introduced a change in record-keeping requirements, periodic AML audits will bring it to notice, according to which the business can make the required changes.

The regulated entities in the UAE must take a risk-based approach and manage their money laundering, terrorist financing, and proliferation financing risks. One important risk factor is the jurisdictions the entity works with. In this infographic, we will understand the red flags associated with high-risk jurisdictions. The regulated entities must take appropriate countermeasures while dealing with such high-risk countries.

Geographic risk is associated with countries with poor AML/CFT framework, high levels of corruption, drug production and cartel activities, unstable political environment, and lack of transparency. Such countries are also known as secrecy or tax havens.

Red flags are potential risk indicators for money laundering, terrorist financing, or proliferation financing. This infographic lists red flags associated with high-risk countries and jurisdictions.

Businesses dealing with such high-risk jurisdictions must watch out for the red flags to safeguard themselves from various risks such as fraud, theft, reputational damage, and regulatory fines and penalties. Depending upon the risk-based approach adopted by the regulated entity, the entity needs to identify, assess, and counter jurisdiction risk.

Jurisdiction risk must be considered while performing the Enterprise-Wide Risk Assessment and Customer Risk Assessment. If the entity observes any red flags associated with high-risk jurisdictions, it must employ countermeasures such as enhanced due diligence, ongoing monitoring, and regulatory reporting (HRC and HRCA reporting).

As per the FATF blacklist, Iran, North Korea, and Myanmar are treated as high-risk jurisdictions. For more understanding about FATF blacklist and grey list, Read our article What are FATF Blacklist and Grey list countries? February 2024.

Smurfing is one of the widely used money laundering techniques. In this technique, the money launderer fragments the large cash amount into smaller amounts to keep it below the threshold level set for AML checks (such as applying Customer Due Diligence measures, ongoing monitoring and reporting) and then deposits it into financial institutions.

AML laws and regulations mandate that reporting entities take the right measures to identify and prevent smurfing activities. They are obliged to maintain red-flag indicators that indicate suspicious transactions and activities related to potential smurfing attempts and submit the necessary report with the Financial Intelligence Unit (FIU) by filing a Suspicious Transactions Report and Suspicious Activity Report, as the case may respectively.

Such risk indicators may include multiple cash deposits of equal amounts from one or more persons from various locations to the same bank account or multiple accounts opened by a single person who does not have any apparent business transactions through these accounts but is merely used for the distribution of illegal funds.

This infographic provides a list of red flags associated with the smurfing technique that you can implement in your AML program. These red flags relate to transactions, customer behaviour, and account activity.

By implementing these red flag indicators in your anti-money laundering compliance program, you can shield your business from smurfing and related financial crime activities.

The gold supply chain has several stages, including extracting, transporting, handling, etc., and is highly vulnerable to financial crime risks. Some of these risks are associated with specific supply chain stages or the players involved in the gold supply chain, whereas other risks are common to all the stages of the gold supply chain.

To easily identify and facilitate the mitigation of ML/FT risks observed in the course of the gold supply chain, we have provided a substantive list of red flags and bifurcated them into various categories for better understanding:

• Red Flags associated with Gold Mining Companies
• Red Flags associated with Shipping
• Red Flags associated with Gold Trading Companies
• Red Flags associated with Transactions and Activities
• Red Flags associated with Geography

The range of the risk indicators is very wide, covering non-compliance of the environment regulations by a mining company, while routing the gold shipment through refineries in jurisdictions that do not offer any economic advantage. Inconsistencies in the transaction value or volume or excessive dealing with unregulated markets are also ML/FT red flags that may suggest abuse of the gold supply chain.

Whenever any of these red flags are observed, immediate action and investigation are demanded. The proactive approach is necessary to ensure a secure gold supply chain and effectively mitigate ML/FT risks.

The first way to conduct the research is through multiple search engines, such as Google and Bing.

One needs to search for the name of the prospect or customer along with the word strings that contain all the relevant words necessary to confirm the existence of the negative media. Two such strings are:

1. launder OR fraud OR bribe OR corrupt OR arrest OR blackmail OR breach OR convict OR court case OR embezzle OR extort OR felon OR fined OR guilty
2. illegal OR imprisonment OR jail OR kickback OR litigate OR mafia OR murder OR prosecute OR terrorism OR theft OR unlawful OR verdict OR politic OR sanctions

For instance, if you want to conduct an adverse media check for a person named Mr. A, then you’ll do the following searches on the search engine:

1. A launder OR fraud OR bribe OR corrupt OR arrest OR blackmail OR breach OR convict OR court case OR embezzle OR extort OR felon OR fined OR guilty
2. A illegal OR imprisonment OR jail OR kickback OR litigate OR mafia OR murder OR prosecute OR terrorism OR theft OR unlawful OR verdict OR politic OR sanctions

By conducting these searches, employees gain results having any of these trigger words associated with a person having the same name.

The regulated entities are required to document the RBA methodology adopted by the company. Some companies fail to document or adequately describe the overall RBA methodology.