Handbook of Anti-Money Laundering.

CHAPTER 19SUSPICIOUS CONDUCT AND TRANSACTIONS

19.1 INTRODUCTION

What is suspicious activity? The problem is that while it might be easy to see with hindsight, the question is whether there are signals which can be identified in advance. Both society at large and regulators are increasingly expecting a firm to have adequate procedures to detect suspicious activity, both when taking on an account and also when operating client activity. Many regulators actually publish lists of transactions that they consider are such that they should result in a firm becoming suspicious, but these can only ever be a subset of the type of transactions that are likely to be of concern in practice. The problem is that the expectation that is being placed on financial institutions may well exceed their ability to identify suspicious transactions, since the nature of suspicion itself is such a difficult concept to apply in practice.

Of course, a transaction that might appear suspicious to one person may appear commonplace to another. For many people, derivatives transactions, for example, appear suspicious, yet to others they are commonplace. The wealthy may borrow monies when they actually have assets available, for convenience. Such behaviour might appear bizarre to someone without such assets. Indeed, employees of the firm being familiar with the nature of business being conducted may have the effect of reducing the likelihood of a suspicion being identified.

Identifying, investigating and documenting ...