4 Warning Signs of Money Laundering

Money Laundering

Being found to be involved in money laundering can be very disastrous to a bank or any other financial institution. Not only could it result in thousands or even millions of dollars lost in legal fees and fines, but it could also become a huge PR disaster for the institution involved. These reasons and more are why it’s important to recognize money laundering when it is about to happen—to spot the red flags before the crime itself is committed.

Money Laundering

But how do we do that? One effective way is to employ smart anti money laundering solutions. These are sophisticated computer programs that are bolstered by artificial intelligence and machine learning technologies—meaning that they require very little user input to do what they’re supposed to, and can even learn to function more quickly as time goes by. By using these programs to analyze a bank’s entire database of customer and transaction data, suspicious links and clues can be found which could then lead to the discovery of money laundering.

Having such solutions employed is not enough, however. A financial institution’s staff must also be able to recognize some of the tell-tale signs of money laundering to better avoid being implicated in illegal dealings. To this end, we’ve compiled the following list of the 4 biggest warning signs of money laundering.

Incomplete and inconsistent information

One of the biggest red flags of money laundering involves the information that a client supplies in their fulfillment of your bank’s requirements. Is it incomplete or inconsistent in any way? Are there parts of it that appear to be unverifiable? If the answer is yes to any of these, then it may be safer to err on the side of caution and turn the client away—or at the very least, require them to return with complete and verified information.

Reluctance to provide or complete information

Check the behavior of your client, especially when it comes to you asking questions or requesting further information for the purpose of due diligence. Do they seem reluctant in answering your questions in detail or vague in their answers? As for supplying information, do they seem prone to putting it off even after multiple requests and urgent reminders? Again, if the answer is yes to any of these questions, then this another red flag and should be treated as such.

Choosing your bank for unclear reasons

Many rural banks may find it a pleasant surprise that a big city business or professional has decided to invest their money in their small outfit, but this in itself is also a warning sign, especially if the interested party is based in another state or even another continent. This may not be true in all cases, however. If you’ve been advertising widely, such as in TV networks or in social media, then you may have just managed to attract a big client seeking to deal with smaller banks. If not, then consider it a red flag and proceed with caution.

Mysterious sources of funds

Check your client’s source of funding. Are they more than willing to give you documentary evidence about where their money came from, or are they mysteriously evasive about it? While there can be legitimate one-off instances where a lot of money just gets dropped into someone’s lap and they need to deposit it into a bank quickly—such as when they get hold of an inheritance or even a big-ticket lottery win—even those would come with a clear and verifiable paper trail. In the event that your client appears to have suddenly gotten a large amount of funding and have nothing to show for it, then see it for the warning sign that it is, and act accordingly.

By recognizing these warning signs, you can help your bank avoid being implicated in money laundering, and thus spare you and your staff the grief of having to deal with the charges, fines, and prison time.

Signs of Money Laundering




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DollarBreeders is a personal finance blog dedicated to people who want to take control of their finances and secure their future. Here you will find personal stories to inspire you to make better and more informed financial decisions. We aim to help people understand personal finances better and meet the challenge of living comfortably within the budget.