Funds transfers are electronic payments that move money from one account to another, either within the same financial institution or across different institutions, countries, or currencies1. Funds transfers are commonly used for legitimate purposes, such as remittances, trade, or investment, but they can also be abused by money launderers, terrorists, or fraudsters to move illicit funds or conceal their origin or destination2. Therefore, financial institutions and other entities that offer funds transfer services are required to apply anti-money laundering and counter-terrorism financing (AML/CFT) measures, such as customer due diligence, transaction monitoring, record-keeping, and reporting of suspicious activities2.
One of the red flags for funds transfers that may indicate money laundering or other criminal activity is when funds transfers are repeatedly sent to the same beneficiary out of line with the business purpose3. This could suggest that the originator and the beneficiary are colluding to layer or integrate illicit funds, or to evade reporting or sanctions requirements. For example, a business may send multiple funds transfers to the same supplier, but the amounts or frequencies do not match the invoices or contracts, or the supplier is located in a high-risk jurisdiction or is subject to sanctions. Alternatively, an individual may send frequent funds transfers to the same person, but the relationship or the reason for the transfers is unclear or inconsistent, or the person is associated with a criminal or terrorist organization. In such cases, the financial institution or the funds transfer service provider should conduct enhanced due diligence, verify the source and purpose of the funds, and report any suspicious activity to the relevant authorities.
1: Wire Transfer Definition - Investopedia
2: International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - The FATF Recommendations | FATF
3: Wire Transfer Red Flags: Money Laundering & Fraud Risks - Alessa1
