Casino Money Laundering Red Flags

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Anti Money Laundering Red Flags
Structuring Money Laundering Red Flags
Trump Casino Money Laundering Charges
Fincen Money Laundering Red Flags

Appendices

APPENDIX F: MONEY LAUNDERING AND TERRORIST FINANCING 'RED FLAGS'

4 Red Flags of Money Laundering or Terrorist Financing by Lowers & Associates May 26, 2015 One of the most important aspects of BSA/AML compliance is the responsibility it places on regulated financial entities to report suspicious transactions. Lots is often written about red flags within a sector to spot money laundering but not much is written about cross-sectoral red flags that can help investigators identify potential money laundering, where the combination of factors in different sectors may increase the probability of the incidence of money laundering. Recognizing Suspicious Activity - Red Flags for Casinos and Card Clubs This guidance is intended to assist casinos and card clubs 1 with the reporting of suspected money laundering, terrorist financing and related financial crimes.

The following are examples of potentially suspicious activities, or 'red flags' for both money laundering and terrorist financing. Although these lists are not all-inclusive, they may help banks and examiners recognize possible money laundering and terrorist financing schemes. FinCEN issues advisories containing examples of 'red flags' to inform and assist banks in reporting instances of suspected money laundering, terrorist financing, and fraud. In order to assist law enforcement in its efforts to target these activities, FinCEN requests that banks check the appropriate box(es) in the Suspicious Activity Information section and include certain key terms in the narrative section of the SAR. The advisories and guidance can be found on FinCEN's website. ³⁰² Management’s primary focus should be on reporting suspicious activities, rather than on determining whether the transactions are in fact linked to money laundering, terrorist financing, or a particular crime.

The following examples are red flags that, when encountered, may warrant additional scrutiny. The mere presence of a red flag is not by itself evidence of criminal activity. Closer scrutiny should help to determine whether the activity is suspicious or one for which there does not appear to be a reasonable business or legal purpose.

Potentially Suspicious Activity That May Indicate Money Laundering

Customers Who Provide Insufficient or Suspicious Information

A customer uses unusual or suspicious identification documents that cannot be readily verified.
A customer provides an individual taxpayer identification number after having previously used a Social Security number.
A customer uses different taxpayer identification numbers with variations of his or her name.
A business is reluctant, when establishing a new account, to provide complete information about the nature and purpose of its business, anticipated account activity, prior banking relationships, the names of its officers and directors, or information on its business location.
A customer’s home or business telephone is disconnected.
The customer’s background differs from that which would be expected on the basis of his or her business activities.
A customer makes frequent or large transactions and has no record of past or present employment experience.
A customer is a trust, shell company, or Private Investment Company that is reluctant to provide information on controlling parties and underlying beneficiaries. Beneficial owners may hire nominee incorporation services to establish shell companies and open bank accounts for those shell companies while shielding the owner’s identity.

Efforts to Avoid Reporting or Recordkeeping Requirement

A customer or group tries to persuade a bank employee not to file required reports or maintain required records.
A customer is reluctant to provide information needed to file a mandatory report, to have the report filed, or to proceed with a transaction after being informed that the report must be filed.
A customer is reluctant to furnish identification when purchasing negotiable instruments in recordable amounts.
A business or customer asks to be exempted from reporting or recordkeeping requirements.
A person customarily uses the automated teller machine to make several bank deposits below a specified threshold.
A customer deposits funds into several accounts, usually in amounts of less than $3,000, which are subsequently consolidated into a master account and transferred outside of the country, particularly to or through a location of specific concern (e.g., countries designated by national authorities and Financial Action Task Force on Money Laundering (FATF) as noncooperative countries and territories).
A customer accesses a safe deposit box after completing a transaction involving a large withdrawal of currency, or accesses a safe deposit box before making currency deposits structured at or just under $10,000, to evade CTR filing requirements.

Funds Transfers

Many funds transfers are sent in large, round dollar, hundred dollar, or thousand dollar amounts.
Funds transfer activity occurs to or from a financial secrecy haven, or to or from a higher-risk geographic location without an apparent business reason or when the activity is inconsistent with the customer’s business or history.
Funds transfer activity occurs to or from a financial institution located in a higher risk jurisdiction distant from the customer's operations.
Many small, incoming transfers of funds are received, or deposits are made using checks and money orders. Almost immediately, all or most of the transfers or deposits are wired to another city or country in a manner inconsistent with the customer’s business or history.
Large, incoming funds transfers are received on behalf of a foreign client, with little or no explicit reason.
Funds transfer activity is unexplained, repetitive, or shows unusual patterns.
Payments or receipts with no apparent links to legitimate contracts, goods, or services are received.
Funds transfers are sent or received from the same person to or from different accounts.
Funds transfers contain limited content and lack related party information.

Automated Clearing House Transactions

Large-value, automated clearing house (ACH) transactions are frequently initiated through third-party service providers (TPSP) by originators that are not bank customers and for which the bank has no or insufficient due diligence.
TPSPs have a history of violating ACH network rules or generating illegal transactions, or processing manipulated or fraudulent transactions on behalf of their customers.
Multiple layers of TPSPs that appear to be unnecessarily involved in transactions.
Unusually high level of transactions initiated over the Internet or by telephone.
NACHA — The Electronic Payments Association (NACHA) information requests indicate potential concerns with the bank's usage of the ACH system.

Activity Inconsistent with the Customer’s Business

The currency transaction patterns of a business show a sudden change inconsistent with normal activities.
A large volume of cashier’s checks, money orders, or funds transfers is deposited into, or purchased through, an account when the nature of the accountholder’s business would not appear to justify such activity.
A retail business has dramatically different patterns of currency deposits from similar businesses in the same general location.
Unusual transfers of funds occur among related accounts or among accounts that involve the same or related principals.
The owner of both a retail business and a check-cashing service does not ask for currency when depositing checks, possibly indicating the availability of another source of currency.
Goods or services purchased by the business do not match the customer’s stated line of business.
Payments for goods or services are made by checks, money orders, or bank drafts not drawn from the account of the entity that made the purchase.

Lending Activity

Loans secured by pledged assets held by third parties unrelated to the borrower.
Loan secured by deposits or other readily marketable assets, such as securities, particularly when owned by apparently unrelated third parties.
Borrower defaults on a cash-secured loan or any loan that is secured by assets which are readily convertible into currency.
Loans are made for, or are paid on behalf of, a third party with no reasonable explanation.
To secure a loan, the customer purchases a certificate of deposit using an unknown source of funds, particularly when funds are provided via currency or multiple monetary instruments.
Loans that lack a legitimate business purpose, provide the bank with significant fees for assuming little or no risk, or tend to obscure the movement of funds (e.g., loans made to a borrower and immediately sold to an entity related to the borrower).

Changes in Bank-to-Bank Transactions

The size and frequency of currency deposits increases rapidly with no corresponding increase in noncurrency deposits.
A bank is unable to track the true accountholder of correspondent or concentration account transactions.
The turnover in large-denomination bills is significant and appears uncharacteristic, given the bank’s location.
Changes in currency-shipment patterns between correspondent banks are significant.

Cross-Border Financial Institution Transactions

U.S. bank increases sales or exchanges of large denomination U.S. bank notes to Mexican financial institution(s).
Large volumes of small denomination U.S. banknotes being sent from Mexican casas de cambio to their U.S. accounts via armored transport or sold directly to U.S. banks. These sales or exchanges may involve jurisdictions outside of Mexico.
Casas de cambio direct the remittance of funds via multiple funds transfers to jurisdictions outside of Mexico that bear no apparent business relationship with the casas de cambio. Funds transfer recipients may include individuals, businesses, and other entities in free trade zones.
Casas de cambio deposit numerous third-party items, including sequentially numbered monetary instruments, to their accounts at U.S. banks.
Casas de cambio direct the remittance of funds transfers from their accounts at Mexican financial institutions to accounts at U.S. banks. These funds transfers follow the deposit of currency and third-party items by the casas de cambio into their Mexican financial institution.

Bulk Currency Shipments

An increase in the sale of large denomination U.S. bank notes to foreign financial institutions by U.S. banks.
Large volumes of small denomination U.S. bank notes being sent from foreign nonbank financial institutions to their accounts in the United States via armored transport, or sold directly to U.S. banks.
Multiple wire transfers initiated by foreign nonbank financial institutions that direct U.S. banks to remit funds to other jurisdictions that bear no apparent business relationship with that foreign nonbank financial institution. Recipients may include individuals, businesses, and other entities in free trade zones and other locations.
The exchange of small denomination U.S. bank notes for large denomination U.S. bank notes that may be sent to foreign countries.
Deposits by foreign nonbank financial institutions to their accounts at U.S. banks that include third-party items, including sequentially numbered monetary instruments.
Deposits of currency and third-party items by foreign nonbank financial institutions to their accounts at foreign financial institutions and thereafter direct wire transfers to the foreign nonbank financial institution's accounts at U.S. banks.

Trade Finance

Items shipped that are inconsistent with the nature of the customer’s business (e.g., a steel company that starts dealing in paper products, or an information technology company that starts dealing in bulk pharmaceuticals).
Customers conducting business in higher-risk jurisdictions.
Customers shipping items through higher-risk jurisdictions, including transit through noncooperative countries.
Customers involved in potentially higher-risk activities, including activities that may be subject to export/import restrictions (e.g., equipment for military or police organizations of foreign governments, weapons, ammunition, chemical mixtures, classified defense articles, sensitive technical data, nuclear materials, precious gems, or certain natural resources such as metals, ore, and crude oil).
Obvious over- or under-pricing of goods and services.
Obvious misrepresentation of quantity or type of goods imported or exported.
Transaction structure appears unnecessarily complex and designed to obscure the true nature of the transaction.
Customer requests payment of proceeds to an unrelated third party.
Shipment locations or description of goods not consistent with letter of credit.
Significantly amended letters of credit without reasonable justification or changes to the beneficiary or location of payment. Any changes in the names of parties should prompt additional OFAC review.

Privately Owned Automated Teller Machines

Automated teller machine (ATM) activity levels are high in comparison with other privately owned or bank-owned ATMs in comparable geographic and demographic locations.
Sources of currency for the ATM cannot be identified or confirmed through withdrawals from account, armored car contracts, lending arrangements, or other appropriate documentation.

Insurance

A customer purchases products with termination features without concern for the product’s investment performance.
A customer purchases insurance products using a single, large premium payment, particularly when payment is made through unusual methods such as currency or currency equivalents.
A customer purchases a product that appears outside the customer’s normal range of financial wealth or estate planning needs.
A customer borrows against the cash surrender value of permanent life insurance policies, particularly when payments are made to apparently unrelated third parties.
Policies are purchased that allow for the transfer of beneficial ownership interests without the knowledge and consent of the insurance issuer. This would include secondhand endowment and bearer insurance policies.
A customer is known to purchase several insurance products and uses the proceeds from an early policy surrender to purchase other financial assets.
A customer uses multiple currency equivalents (e.g., cashier's checks and money orders) from different banks and money services businesses to make insurance policy or annuity payments.

Shell Company Activity

A bank is unable to obtain sufficient information or information is unavailable to positively identify originators or beneficiaries of accounts or other banking activity (using Internet, commercial database searches, or direct inquiries to a respondent bank).
Payments to or from the company have no stated purpose, do not reference goods or services, or identify only a contract or invoice number.
Goods or services, if identified, do not match profile of company provided by respondent bank or character of the financial activity; a company references remarkably dissimilar goods and services in related funds transfers; explanation given by foreign respondent bank is inconsistent with observed funds transfer activity.
Transacting businesses share the same address, provide only a registered agent’s address, or have other address inconsistencies.
Unusually large number and variety of beneficiaries are receiving funds transfers from one company.
Frequent involvement of multiple jurisdictions or beneficiaries located in higher-risk offshore financial centers.
A foreign correspondent bank exceeds the expected volume in its client profile for funds transfers, or an individual company exhibits a high volume and pattern of funds transfers that is inconsistent with its normal business activity.
Multiple high-value payments or transfers between shell companies with no apparent legitimate business purpose.
Purpose of the shell company is unknown or unclear.

Embassy, Foreign Consulate, and Foreign Mission Accounts

Official embassy business is conducted through personal accounts.
Account activity is not consistent with the purpose of the account, such as pouch activity or payable upon proper identification transactions.
Accounts are funded through substantial currency transactions.
Accounts directly fund personal expenses of foreign nationals without appropriate controls, including, but not limited to, expenses for college students.

Employees

Employee exhibits a lavish lifestyle that cannot be supported by his or her salary.
Employee fails to conform to recognized policies, procedures, and processes, particularly in private banking.
Employee is reluctant to take a vacation.
Employee overrides a hold placed on an account identified as suspicious so that transactions can occur in the account.

Other Unusual or Suspicious Customer Activity

Customer frequently exchanges small-dollar denominations for large-dollar denominations.
Customer frequently deposits currency wrapped in currency straps or currency wrapped in rubber bands that is disorganized and does not balance when counted.
Customer purchases a number of cashier’s checks, money orders, or traveler’s checks for large amounts under a specified threshold.
Customer purchases a number of open-end prepaid cards for large amounts. Purchases of prepaid cards are not commensurate with normal business activities.
Customer receives large and frequent deposits from online payments systems yet has no apparent online or auction business.
Monetary instruments deposited by mail are numbered sequentially or have unusual symbols or stamps on them.
Suspicious movements of funds occur from one bank to another, and then funds are moved back to the first bank.
Deposits are structured through multiple branches of the same bank or by groups of people who enter a single branch at the same time.
Currency is deposited or withdrawn in amounts just below identification or reporting thresholds.
Customer visits a safe deposit box or uses a safe custody account on an unusually frequent basis.
Safe deposit boxes or safe custody accounts opened by individuals who do not reside or work in the institution’s service area, despite the availability of such services at an institution closer to them.
Customer repeatedly uses a bank or branch location that is geographically distant from the customer's home or office without sufficient business purpose.
Customer exhibits unusual traffic patterns in the safe deposit box area or unusual use of safe custody accounts. For example, several individuals arrive together, enter frequently, or carry bags or other containers that could conceal large amounts of currency, monetary instruments, or small valuable items.
Customer rents multiple safe deposit boxes to store large amounts of currency, monetary instruments, or high-value assets awaiting conversion to currency, for placement into the banking system. Similarly, a customer establishes multiple safe custody accounts to park large amounts of securities awaiting sale and conversion into currency, monetary instruments, outgoing funds transfers, or a combination thereof, for placement into the banking system.
Unusual use of trust funds in business transactions or other financial activity.
Customer uses a personal account for business purposes.
Customer has established multiple accounts in various corporate or individual names that lack sufficient business purpose for the account complexities or appear to be an effort to hide the beneficial ownership from the bank.
Customer makes multiple and frequent currency deposits to various accounts that are purportedly unrelated.
Customer conducts large deposits and withdrawals during a short time period after opening and then subsequently closes the account or the account becomes dormant. Conversely, an account with little activity may suddenly experience large deposit and withdrawal activity.
Customer makes high-value transactions not commensurate with the customer's known incomes.

Potentially Suspicious Activity That May Indicate Terrorist Financing

The following examples of potentially suspicious activity that may indicate terrorist financing are primarily based on guidance 'Guidance for Financial Institutions in Detecting Terrorist Financing' provided by the FATF. ³⁰³ FATF is an intergovernmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist financing.

Activity Inconsistent With the Customer’s Business

Funds are generated by a business owned by persons of the same origin or by a business that involves persons of the same origin from higher-risk countries (e.g., countries designated by national authorities and FATF as noncooperative countries and territories).
The stated occupation of the customer is not commensurate with the type or level of activity.
Persons involved in currency transactions share an address or phone number, particularly when the address is also a business location or does not seem to correspond to the stated occupation (e.g., student, unemployed, or self-employed).
Regarding nonprofit or charitable organizations, financial transactions occur for which there appears to be no logical economic purpose or in which there appears to be no link between the stated activity of the organization and the other parties in the transaction.
A safe deposit box opened on behalf of a commercial entity when the business activity of the customer is unknown or such activity does not appear to justify the use of a safe deposit box.

Funds Transfers

A large number of incoming or outgoing funds transfers take place through a business account, and there appears to be no logical business or other economic purpose for the transfers, particularly when this activity involves higher-risk locations.
Funds transfers are ordered in small amounts in an apparent effort to avoid triggering identification or reporting requirements.
Funds transfers do not include information on the originator, or the person on whose behalf the transaction is conducted, when the inclusion of such information would be expected.
Multiple personal and business accounts or the accounts of nonprofit organizations or charities are used to collect and funnel funds to a small number of foreign beneficiaries.
Foreign exchange transactions are performed on behalf of a customer by a third party, followed by funds transfers to locations having no apparent business connection with the customer or to higher-risk countries.

Other Transactions That Appear Unusual or Suspicious

Transactions involving foreign currency exchanges are followed within a short time by funds transfers to higher-risk locations.
Multiple accounts are used to collect and funnel funds to a small number of foreign beneficiaries, both persons and businesses, particularly in higher-risk locations.
A customer obtains a credit instrument or engages in commercial financial transactions involving the movement of funds to or from higher-risk locations when there appear to be no logical business reasons for dealing with those locations.
Banks from higher-risk locations open accounts.
Funds are sent or received via international transfers from or to higher-risk locations.
Insurance policy loans or policy surrender values that are subject to a substantial surrender charge.

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Appendix E – International Organizations

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Appendix G – Structuring

January 2019

This guidance on suspicious transactions is applicable to all casinos that are subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations. It is recommended that this guidance be read in conjunction with other suspicious transaction report (STR) guidance, including:

This guidance provides money laundering (ML) and terrorist financing (TF) indicators (ML/TF indicators) organized by topic:

ML/TF indicators related to identifying the person
ML/TF indicators related to client behaviour
ML/TF indicators surrounding the financial transactions in relation to the person profile
ML/TF indicators related to products and services
ML/TF indicators related to change in account activity
ML/TF indicators based on atypical transactional activity
ML/TF indicators related to transactions structured below the reporting or identification requirements
ML/TF indicators involving wire transfers (including electronic funds transfers)
ML/TF indicators related to transactions that involve non-Canadian jurisdictions
ML/TF indicators related to use of other parties
Indicators specifically related to terrorist financing
ML/TF indicators specific to casinos

ML/TF indicators are potential red flags that could initiate suspicion or indicate that something may be unusual in the absence of a reasonable explanation. Red flags typically stem from one or more factual characteristics, behaviours, patterns or other contextual factors that identify irregularities related to financial transactions. These often present inconsistencies with what is expected of your client based on what you know about them.

The ML/TF indicators in this guidance were developed by FINTRAC through a three-year review of ML/TF cases, a review of high quality STRs, published literature by international organizations such as the Financial Action Task Force (FATF) and the Egmont Group, and consultation with reporting entity sectors. These ML/TF indicators do not cover every possible situation but were developed to provide you with a general understanding of what is or could be unusual or suspicious. On its own, a single ML/TF indicator may not appear suspicious. However, observing an ML/TF indicator(s) could lead you to conduct an assessment of the transaction(s) to determine whether there are further facts, contextual elements or additional ML/TF indicators that require the submission of an STR.

Criminal organizations often combine various methods in different ways in order to avoid the detection of ML/TF. If you detect unusual or suspicious behaviour or a transaction that prompts the need for an assessment, ML/TF indicators combined with facts and context can help you determine if there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of an ML/TF offence. These ML/TF indicators may also be used to explain or articulate the rationale for your reasonable grounds to suspect in the narrative portion of an STR, as they provide valuable information from a financial intelligence perspective.

Important considerations

One piece of the puzzle

The ML/TF indicators in this guidance are not an exhaustive list of ML/TF indicators to support all suspicious scenarios. These ML/TF indicators should be considered as examples to guide the development of your own process to determine when you have reasonable grounds to suspect that the transaction is related to the commission or attempted commission of an ML/TF offence. These ML/TF indicators are one piece of the puzzle and are designed to complement your own STR program and can be used in conjunction with other publicly-available ML/TF indicators.

During an assessment, FINTRAC will review your policies and procedures to see how you use ML/TF indicators within your STR program. Part of the assessment will include evaluating how the actual policies follow your documented approach and determining its effectiveness with respect to the use of ML/TF indicators. This can include a review of transactions to determine how your STR program identifies potential STRs and assesses them using facts, context and ML/TF indicators. For example, you can receive questions if you have not reported an STR for a client you have assessed as high risk and that client activity also matches against multiple ML/TF indicators.

Combination of facts, context and ML/TF indicators

If the context surrounding a transaction is suspicious, it could lead you to assess a client's financial transactions. Facts, context and ML/TF indicators need to be assessed to determine whether there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of an ML/TF offence. On its own, a single financial transaction or ML/TF indicator may not appear suspicious. However, this does not mean you should stop your assessment. Additional facts or context about the associated individual or their actions may help you reach the reasonable grounds to suspect threshold.

Alert or triggering system

FINTRAC acknowledges that a reporting entity may have developed a system that relies on specific alerts or triggering events to signal when to assess a transaction to determine if an STR should be submitted to FINTRAC. If you rely on such a system, FINTRAC expects that you review the alerts in a timely manner in order to determine if an STR should be submitted. Regardless of how you choose to operationalize these ML/TF indicators, FINTRAC expects that you will be able to demonstrate that you have an effective process to identify, assess and submit STRs to FINTRAC.

General ML/TF indicators

The ML/TF indicators in the following section are applicable to both suspected money laundering and/or terrorist financing. The ability to detect, prevent and deter money laundering and/or terrorist financing begins with properly identifying the person in order to review and report suspicious financial activity.

As a casino, you may observe these ML/TF indicators over the course of your business activities with a client. It is important to note that depending on your business activities, some of these ML/TF indicators may not apply.

ML/TF indicators related to identifying the person

The following are examples of ML/TF indicators that you may observe when identifying persons.

There is an inability to properly identify the client or there are questions surrounding the client's identity.
When opening an account, the client refuses or tries to avoid providing information required, or provides information that is misleading, vague, or difficult to verify.
The identification presented by the client cannot be verified (e.g. it is a copy).
There are inconsistencies in the identification documents or different identifiers provided by the client, such as address, date of birth or phone number.
Client produces seemingly false information or identification that appears to be counterfeited, altered or inaccurate.
Client displays a pattern of name variations from one transaction to another or uses aliases.
Client alters the transaction after being asked for identity documents.
The client provides only a non-civic address such as a post office box or disguises a post office box as a civic address for the purpose of concealing their physical address.
Common identifiers (e.g. addresses, phone numbers, etc.) used by multiple clients that do not appear to be related.
Transactions involve individual(s) identified by media, law enforcement and/or intelligence agencies as being linked to criminal activities.
Attempts to verify the information provided by a new or prospective client are difficult.

ML/TF indicators related to client behaviour

The contextual information acquired through the know your client (KYC) requirements or the behaviour of a client, particularly surrounding a transaction or a pattern of transactions, may lead you to conduct an assessment in order to determine if you are required to submit an STR to FINTRAC. The following are some examples of ML/TF indicators that are linked to contextual behavior and may be used in conjunction with your assessment and your risk based approach.

Client makes statements about involvement in criminal activities.
Client conducts transactions at different physical locations, or approaches different staff.
Evidence of untruthfulness on behalf of the client (e.g. providing false or misleading information).
Client exhibits nervous behaviour.
The client refuses to provide information when required, or is reluctant to provide information.
Client has a defensive stance to questioning.
Client presents confusing details about the transaction or knows few details about its purpose.
Client avoids contact with reporting entity employees.
The client refuses to identify a source for funds or provides information that is false, misleading, or substantially incorrect.
Client makes inquiries/statements indicating a desire to avoid reporting or tries to persuade the reporting entity not to file/maintain required reports.
Insufficient explanation for source of funds.
Client closes account after an initial deposit is made without a reasonable explanation.

ML/TF indicators surrounding the financial transactions in relation to the person profile

Clearly understanding the expected activity of a person will allow you to assess their financial/gaming activity with the proper lens. For example, a person conducting financial transactions atypical of their financial or gaming profile. The following are some examples of ML/TF indicators surrounding the financial transactions related to person profile.

The transactional activity (level or volume) is inconsistent with the client's apparent financial standing, their usual pattern of activities or occupational information (e.g. student, unemployed, social assistance, etc.).
Client appears to be living beyond their means.
Large and/or rapid movement of funds not commensurate with the client's financial profile.
Size or type of transactions atypical of what is expected from the client.
Opening accounts when the client's address or employment address are outside the local service area without a reasonable explanation.
There is a sudden change in client's financial profile, pattern of activity or transactions.
Client uses notes, monetary instruments, or products and/or services that are unusual for such a client.

ML/TF indicators related to products and services

Accounts can take different forms (e.g. chequing, savings, investment, etc.) and for the purposes of this section, the ML/TF indicators below will aim to address the ML/TF risks linked to different types of accounts held by various reporting entities in Canada. There are many ML/TF indicators related to account activity. Your process to evaluate risk for accounts and any other products and services you provide should be documented as part of your KYC and risk based approach requirements. The following ML/TF indicators will focus on products or services that may be applicable within your business.

A product and/or service opened on behalf of a person that is inconsistent based on what you know about that client.
Use of multiple foreign bank accounts for no apparent reason.
Credit card transactions and payments are exceptionally high for what is expected of the client including an excessive amount of cash advance usage, balance transfer requests or transactions involving luxury items.

ML/TF indicators related to change in account activity

Certain changes regarding an account may be indicative of ML/TF for a multitude of reasons including, but not limited to, the use of an account to suddenly launder or transmit funds, an increase in volume, changes in ownership of an account, etc. Changes in account activity may trigger a need for further assessment of the person holding the account and some examples to consider are listed below.

An inactive account begins to see financial activity (e.g. deposits, wire transfers, withdrawals).
Abrupt change in account activity.

ML/TF indicators based on atypical transactional activity

There are certain transactions that are outside the normal conduct of your everyday business. These transactions may be indicative of a suspicious transaction, and would require additional assessment. Some examples of ML/TF indicators based on atypical transactional activity are listed below.

A series of complicated transfers of funds that seems to be an attempt to hide the source and intended use of the funds.
Transactions displaying financial connections between individuals who have previously raised suspicion.
Transaction is unnecessarily complex for its stated purpose.
Client presents notes or financial instruments that are packed, transported or wrapped in an uncommon way.
Transaction consistent with publicly known trend in criminal activity.
Client presents musty, odd smelling or extremely dirty bills.
Client frequently exchanges small bills for larger bills.
Suspicious pattern emerges from a client's transactions (e.g. transactions take place at the same time of day).
Atypical transfers by client on an in-and-out basis, or other methods of moving funds quickly, such as a cash deposit followed immediately by a wire transfer of the funds out.
Funds transferred in and out of an account on the same day or within a relatively short period of time.

ML/TF indicators related to transactions structured below the reporting or identification requirements

Structuring of transactions to avoid reporting or identification requirements is a common method for committing or attempting to commit an ML/TF offence. There are multiple thresholds which trigger reporting/identification requirements by a reporting entity. Some examples of ML/TF indicators which may be indicative of a person attempting to evade identification and/or reporting thresholds are listed below.

Client appears to be structuring amounts to avoid client identification or reporting thresholds.
Client appears to be collaborating with others to avoid client identification or reporting thresholds.
Multiple transactions conducted below the reporting threshold within a short time period.
Client makes inquiries that would indicate a desire to avoid reporting.
Client conducts transactions with different representatives in an apparent attempt to avoid detection.
Client exhibits knowledge of reporting thresholds.

ML/TF indicators involving wire transfers (including electronic funds transfers)

In our current global environment, it is increasingly easier to transfer funds to, from or through multiple jurisdictions (municipal, national or international) in a rapid fashion. This presents an increased ML/TF risk as transactions through multiple accounts and/or jurisdictions increases the difficulty for reporting entities and law enforcement to trace illicit funds. Examples of these types of transactions which may require further assessment include the following.

Large wire transfer or high volume of wire transfers are conducted or received through the account that does not fit the expected pattern of that account.
Client uses various wire deposit methods and disbursement amounts in an attempt to test the vulnerability of the system and/or account.

ML/TF indicators related to transactions that involve non-Canadian jurisdictions

There are certain types of transactions that may be sent or received from jurisdictions outside of Canada where there is higher ML/TF risk due to more permissible laws or the local ML/TF threat environment. The following are examples to consider when making an assessment of the financial transaction conducted by a person through your business.

Transactions with jurisdictions that are known to produce or transit drugs or precursor chemicals or are sources of other types of criminality.
Transactions with jurisdictions that are known to be at a higher risk of ML/TF.
Transaction/business activity involving locations of concern, which can include jurisdictions where there are ongoing conflicts (and periphery areas), countries with weak money laundering/terrorist financing controls, or countries with highly secretive banking or other transactional laws such as transfer limits set by a government.
Transactions involving any countries deemed high risk or non-cooperative by the Financial Action Task Force.
Client makes frequent overseas transfers, not in line with their financial profile.

Due to the ever-evolving nature of the ML/TF environment, high risk jurisdictions and trends are often subject to change. To ensure that you are referencing accurate information, FINTRAC encourages you to research publicly-available sources on a regular basis to support these ML/TF indicators as part of your STR program. There are multiple sources that identify jurisdictions of concern, including the FATF which publishes contextual information on high-risk jurisdictions in relation to their risk of money laundering and terrorist financing. You may also observe funds coming from or going to jurisdictions that are reported in the media as locations where terrorists operate/carry out attacks and/or where terrorists have a large support base (state sponsors or private citizens). Identifying high-risk jurisdictions or known trends can also be included as part of your risk based approach and internal STR program.

ML/TF indicators related to use of third parties

Transactions that involve parties not typically associated with a transaction can present an elevated risk of money laundering and/or terrorist financing. These additional parties can be used to allow a criminal to avoid being identified or being linked to an asset or account. This section includes examples of how the involvement of other parties may be indicative of the structure of a criminal enterprise.

Use of third party

A third party is any individual or entity that instructs someone to act on their behalf for a financial activity or transaction. There are some situations where there is an apparent and discernable rationale for the inclusion of the third party in a transaction and this may not be suspicious. However, you may become suspicious in a situation where the reason for a third party acting on behalf of another person does not make sense based on what you know about the client or the third party. Use of third parties is one method that money launderers and terrorist financiers use to distance themselves from the proceeds of crime or source of criminally obtained funds. By relying on other parties to conduct transactions they can distance themselves from the transactions that can be directly linked to the suspected ML/TF offence. Some examples of ML/TF indicators related to the use of a third party can be found below.

Multiple deposits which are made to an account by non-account holders.
A client conducts transaction while accompanied, overseen or directed by another party.
A client makes numerous payments to unrelated parties shortly after they receive funds.
Wire transfers, deposits or payments to or from unrelated parties (foreign or domestic).
Client appears or states to be acting on behalf of another party.
Account is linked to seemingly unconnected parties.

Indicators related to terrorist financing

In Canada, terrorist financing offences make it a crime to knowingly collect or provide property, which can include financial or other related services, for terrorist purposes. This section is focused on examples that are specific to the possible commission of a terrorist financing offence. However, please note that the other ML/TF indicators in this guidance may also prove relevant in determining when you have reasonable grounds to suspect the commission of terrorist financing as the methods used by criminals to evade detection of money laundering are similar.

Indicators specifically related to terrorist financing:

The indicators below are some examples of indicators relating to terrorist financing.

Transactions involving certain high-risk jurisdictions such as locations in the midst of or in proximity to, armed conflict where terrorist groups operate or locations which are subject to weaker ML/TF controls.
Client identified by media or law enforcement as having travelled, attempted or intended to travel to high-risk jurisdictions (including cities or districts of concern), specifically countries (and adjacent countries) under conflict and/or political instability or known to support terrorist activities and organizations.
Transactions involve individual(s) identified by media and/or sanctions lists as being linked to a terrorist organization or terrorist activities.
Law enforcement information provided which indicates individual(s) may be linked to a terrorist organization or terrorist activities.
Individual's online presence supports violent extremism or radicalization.
Client donates to a cause that is subject to derogatory information that is publicly available (e.g. crowdfunding initiative, charity, NPO, NGO, etc.).

ML/TF indicators specific to Casinos

In addition to the general ML/TF indicators that have been highlighted in this guidance, there may be more specific ML/TF indicators related to your casino business. Below are some examples of sector specific ML/TF indicators that you should consider as part of your STR program.

Any casino transaction of $3,000 or more when an individual receives payment in casino cheques made out to third parties or without a specified payee.
Client requests a winnings cheque in a third party's name.
Acquaintances bet against each other in even-money games and it appears that they are intentionally losing to one of the parties.
Client attempts to avoid the filing of a report for cash by breaking up the transaction.
Client requests cheques that are not for gaming winnings.
Client enquires about opening an account with the casino and the ability to transfer the funds to other locations when you do not know the client as a regular, frequent or large volume player.
Client purchases large volume of chips with cash, participates in limited gambling activity with the intention of creating a perception of significant gambling, and then cashes the chips for a casino cheque.
Client puts money into slot machines and claims accumulated credits as a jackpot win.
Client exchanges small denomination bank notes for large denomination bank notes, chip purchase vouchers or cheques.
Client is known to use multiple names.
Client requests the transfer of winnings to the bank account of a third party or a known drug source country or to a country where there is no effective anti-money-laundering system.

Definitions

Administrative monetary penalties (AMPs)

Civil penalties that may be issued to reporting entities by FINTRAC for non-compliance with the PCMLTFA and related regulations. (pénalité administrative pécuniaire [PAP])

Affiliate

An entity is affiliated with another entity if one of them is wholly owned by the other, if both are wholly owned by the same entity or if their financial statements are consolidated. (entité du même groupe)

As soon as practicable

A time period that falls in-between immediately and as soon as possible within which a suspicious transaction report (STR) be submitted to FINTRAC. In this context, the report must be completed promptly, taking into account the facts and circumstances of the situation. While some amount of delay is permitted, it must have a reasonable explanation. The completion and submission of the report should take priority over other tasks. (aussitôt que possible)

Attempted transaction

Occurs when an individual initiates a transaction and it does not result in the movement of funds or purchase or sale of an asset because the transaction is not completed. For example, a potential client walks away from conducting a $10,000 cash deposit because they do not want to provide their identification. (opération tentée)

Authentic

In respect of a government-issued photo identification document that is used to verify identity, is genuine and has the character of an original, credible, and reliable document issued by the competent authority (federal, provincial, territorial government). (authentique)

Beneficial Owner(s)

Beneficial owners are the actual individuals who are the trustees, and known beneficiaries and settlors of a trust, or who directly or indirectly own or control 25% or more i) of a corporation or ii) an entity other than a corporation or trust, such as a partnership. The ultimate beneficial owner(s) cannot be another corporation or entity; it must be the actual individual(s) who are the owners or controllers of the entity. (bénéficiaire effectif)

Beneficiary

A beneficiary is the individual or entity who will ultimately benefit from a transaction and be the final recipient of the funds. (bénéficiaire)

Branch

A branch is a part of your own business at a distinct location other than your main office. (succursale)

Certified translator

An individual that holds the title of professional certified translator granted by a Canadian provincial or territorial association or body competent under Canadian provincial or territorial law to issue such certification. (traducteur agréé)

Clarification request

A clarification request is a method used to communicate with money services businesses when FINTRAC needs more information about their registration form. This request is usually sent by email. (demande de précisions)

Client/customer

A person or entity that engages in financial transactions through your business. (client)

Competent authority

Any person or organization that has the legally delegated or invested authority, capacity, or power to issue criminal record checks. (autorité compétente)

Completed transaction

Is a transaction initiated by a person or entity that results in the movement of funds or purchase or sale of an asset. (opération effectuée)

Compliance officer

The individual, with the necessary authority, you appoint to be responsible for the implementation of your compliance program. (agent de conformité)

Compliance policies and procedures

Written methodology outlining all of your obligations applicable to your business under the PCMLTFA and its associated Regulations and the corresponding processes and controls you have put in place to address your obligations. (politiques et procédures de conformité)

Compliance program

All elements (compliance officer, policies and procedures, risk assessment, training program, effectiveness review) that you, as a reporting entity, are legally required to have under the PCMLTFA and its associated Regulations to ensure that you meet all of your reporting, record keeping, client identification, and know-your-client requirements. (programme de conformité)

Context

Clarifies a set of circumstances or provides an explanation of a situation or financial transaction that can be understood and assessed. (contexte)

Country of residence

The country where an individual has lived continuously for 12 months or more. The individual must have a dwelling in the country concerned. For greater certainty, a person only has one country of residence no matter how many dwelling places they may have, inside or outside of that country. (pays de résidence)

Credit card acquiring business

A credit card acquiring business is a financial entity that has an agreement with a merchant to provide the following services:

enabling a merchant to accept credit card payments by cardholders for goods and services and to receive payment for credit card purchases;
processing services, payment settlements and providing point-of-sale equipment (such as computer terminals); and
providing other ancillary services to the merchant.

(entreprise d’acquisition de cartes de crédit)

Current

In respect of a document or source of information that is used to verify identity, is up to date, and, in the case of a government-issued photo identification document, must not have been expired when the ID was verified. (à jour)

Directing Services

Anti Money Laundering Red Flags

The services offered by the person or entity take into consideration a Canadian audience (for example, needs, customs, wealth, laws, etc.). (diriger des services)

Disposition

With respect to a financial transaction, the disposition is what the funds were used for. For example, an individual arrives at a bank with cash and purchases a bank draft. The disposition is the purchase of the bank draft. (répartition de fonds)

Electronic funds transfer (EFT)

An electronic funds transfer (money transfer) means the transmission of instructions, for the transfer of funds, to or from Canada. An electronic funds transfer does not include the instructions for the transfer of funds from one place in Canada to another in Canada. (télévirement)

Entity

Can be a corporation, trust, partnership, fund, or an unincorporated association or organization. (entité)

Facts

Actual events, actions, occurrences or elements that exist or are known to have happened or existed. Facts are not opinions. For example, facts surrounding a transaction or multiple transactions could include the date, time, location, amount or type of transaction or could include the account details, particular business lines, or the client’s financial history. (faits)

Financial account

Refers to deposit, credit card or other loan accounts held by a financial entity. This does not include investment accounts such as Registered Retirement Savings Plans (RRSPs). (compte financier)

Financial entity

A financial entity includes:

a bank that is regulated by the Bank Act;
an authorized foreign bank, as defined in section 2 of that Act, in respect of its business in Canada;
a cooperative credit society, savings and credit union or caisse populaire that is regulated by a provincial Act;
an association that is regulated by the Cooperative Credit Associations Act;
a financial services cooperative, a credit union central, a company that is regulated by the Trust and Loan Companies Act;
a trust company or loan company that is regulated by a provincial Act; and
a department or an entity that is an agent or mandatary of Her Majesty in right of Canada or of a province when it is carrying out an activity referred to in section 45 of the PCMLTFR.

(entité financière)

Financial transaction

A financial transaction can indicate one or more instances of an attempted or completed movement of funds or purchase or sale of an asset. (opération financière)

Individual or person

A human being. (individu ou personne)

Institutional trust

An institutional trust is a trust that is established by a corporation, partnership or other entity for a particular business purpose and includes pension plan trusts, pension master trusts, supplemental pension plan trusts, mutual fund trusts, pooled fund trusts, registered retirement savings plan trusts, registered retirement income fund trusts, registered education savings plan trusts, group registered retirement savings plan trusts, deferred profit sharing plan trusts, employee profit sharing plan trusts, retirement compensation arrangement trusts, employee savings plan trusts, health and welfare trusts, unemployment benefit plan trusts, foreign insurance company trusts, foreign reinsurance trusts, reinsurance trusts, real estate investment trusts, environmental trusts and trusts established in respect of endowments, foundations and registered charities. (fiducie institutionnelle)

Inter vivos trust

Also known as a living trust, this is a trust that is not created by a will. This type of trust is established by a living individual for the benefit of another individual, such as a trust created by a parent for a child. Its assets can be distributed to the beneficiary during or after a settlor’s lifetime. (fiducie entre vifs)

Listed person

A listed person means anyone on a list published in the Schedule of the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism issued under the United Nations Act.

A listed person includes an individual, a corporation, a trust, a partnership or fund or an unincorporated association or organization that is believed to:

have carried out, attempted to carry out, participated in or facilitated a terrorist activity; or
be controlled directly or indirectly by, be acting on behalf of, at the direction of, or in association with any individual or entity conducting any of the above activities.

(personne inscrite)

Marketing or Advertising

The person or entity uses promotional materials such as advertisements, graphics for websites or billboards, etc., with the intent to promote services and to acquire business from persons or entities in Canada. (marketing ou publicité)

Minute book

A record that contains the corporate documents of a company. It can include documents such as the articles of incorporation, general operating by-laws, first director resolution, registers, forms, share certificates and minutes of shareholders and directors meetings. (registre des procès-verbaux)

Money laundering and terrorist financing indicators (ML/TF indicators)

Potential red flags that could initiate suspicion or indicate that something may be unusual in the absence of a reasonable explanation. [Indicateurs de blanchiment d’argent (BA) et de financement du terrorisme (FT) (indicateurs de BA/FT)]

Money laundering offence

Means an offence under subsection 462.31(1) of the Criminal Code. The United Nations defines money laundering as 'any act or attempted act to disguise the source of money or assets derived from criminal activity.' Essentially, money laundering is the process whereby 'dirty money'— produced through criminal activity— is transformed into 'clean money,' the criminal origin of which is difficult to trace. (infraction de recyclage des produits de la criminalité [blanchiment d’argent])

Money services business agent

An individual or organization authorized to deliver services on behalf of a money services business (MSB). It is not an MSB branch. (mandataire d’une entreprise de services monétaires)

No apparent reason

There is no clear explanation to account for suspicious behaviour or information. (sans raison apparente)

Occupation

The job or profession of a client. (profession ou métier)

Possibility

In regards to completing a suspicious transaction report (STR), the likelihood that a transaction may be related to a money laundering/terrorist financing (ML/TF) offence. For example, based on your assessment of facts, context and ML/TF indicators you have reasonable grounds to suspect that a transaction is possibly related to the commission or attempted commission of an ML/TF offence. (possibilité)

Principal business

The nature of the primary business of an entity. (entreprise principale)

Probability

The likelihood in regards to completing an suspicious transaction report (STR) that a financial transaction is related to a money laundering/terrorist financing (ML/TF) offence. For example, based on facts you have reasonable grounds to believe that a transaction is probably related to the commission or attempted commission of an ML/TF offence. (probabilité)

Production order

A judicial order that compels a person or entity to disclose records to peace officers or public officers. (ordonnance de communication)

Public body

any department or agent or mandatary of Her Majesty in right of Canada or of a province;
an incorporated city or town, village, metropolitan authority, township, district, county, rural municipality or other incorporated municipal body in Canada or an agent or mandatary in Canada of any of them; and
an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority under the Excise Tax Act, or an agent or mandatary of such an organization.

(organisme public)

Reasonable measures

Reasonable measures means that you must take steps to collect certain information, even if taking those steps did not result in the desired information being obtained. For example, this can include doing one or more of the following:

asking the client,
conducting open source searches, or
consulting commercially available information.

(mesures raisonnables)

Reliable

In respect of information that is used to verify identity, means that the source is well known, reputable, and is considered one that you trust to verify the identity of the client. (fiable)

Representative for service

An individual in Canada that has been appointed by a person or entity that is a foreign money services business (FMSB), pursuant to the PCMLTFA, to receive notices and documents on behalf of the FMSB. (représentant du service)

Risk Assessment

Is an analysis and an application of policies and procedures of potential risks and vulnerabilities that could expose your business to money laundering/terrorist financing (ML/TF) activities. (évaluation des risques)

Senior officer

A senior officer of an organization can be:

Structuring Money Laundering Red Flags

a director who is also a full time employee;
a chief executive officer, chief operating officer, president, secretary treasurer, controller, chief financial officer, chief accountant, chief auditor or chief actuary, or any individual who performs these similar duties; or
any other officer who reports directly to the board of directors, chief executive officer or chief operating officer.

(cadre dirigeant)

Service agreement

With respect to money services businesses (MSBs), an agreement between you and another organization for you to provide them with any of the following MSB services on an ongoing basis:

money transfers;
foreign currency exchange; or
issuing or redeeming money orders, traveller's cheques or anything similar.

(accord de relation commerciale)

Settlor

A settlor is an individual or entity that creates a trust with a written trust declaration. The settlor ensures that legal responsibility for the trust is then given to a trustee and that the trustee is provided with a trust instrument document that explains how the trust is to be used for the beneficiaries. A settlor includes any individual or entity that contributes financially to that trust, either directly or indirectly. (constituant)

Source

The issuer or provider of information or documents for verifying identification. (source)

SWIFT

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) network is a global member-owned cooperative and an international provider of secure financial messaging services. (SWIFT)

Terrorist activity financing offence

Means an offence under section 83.02, 83.03 or 83.04 of the Criminal Code or an offence under section 83.12 of the Criminal Code arising out of a contravention of section 83.08 of that Act.

A terrorist financing offence is knowingly collecting or giving property (such as money) to carry out terrorist activities. This includes the use and possession of any property to help carry out the terrorist activities. The money earned for terrorist financing can be from legal sources, such as personal donations and profits from a business or charitable organization or from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.

(infraction de financement des activités terroristes)

Third party

Any individual or entity that instructs someone to act on their behalf for a financial activity or transaction. (tiers)

Training program

A written and implemented program outlining the ongoing training for your employees, agents or other individuals authorized to act on your behalf about all your obligations and requirements to be fulfilled under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its associated Regulations. (programme de formation)

Trust

A right of property held by one individual or entity (a trustee) for the benefit of another individual or entity (a beneficiary). (fiducie)

Trustee

A trustee is the individual or entity authorized to hold or administer the assets of a trust. (fiduciaire)

Trump Casino Money Laundering Charges

Tutor

In the context of civil law, a person who has been lawfully appointed to the care of the person and property of a minor. (tuteur)

Two year effectiveness review

A review, conducted every two years (at a minimum), by an internal or external auditor to test the effectiveness of your policies and procedures, risk assessment, and training program. (examen bisannuel de l'efficacité)

Valid

In respect of a document or information that is used to verify identity, appears legitimate or authentic and does not appear to have been altered or had any information redacted. The information must also be valid according to the issuer, for example if a passport is invalid because of a name change, it is not valid for FINTRAC purposes. (valide)

Verify client identity

To refer to certain information or documentation to identify a client and ensure that their information matches what you know about them. (vérifier l’identité d’un client)

Very large corporation

Very large corporation has minimum net assets of $75 million CAD on its last audited balance sheet. The corporation's shares have to be traded on a Canadian stock exchange or on a stock exchange outside Canada that is designated by the Minister of Finance. The corporation also has to operate in a country that is a member of the Financial Action Task Force (FATF). (personne morale dont l’actif est très important)

Working days

Fincen Money Laundering Red Flags

A working day is a day between and including Monday to Friday. It excludes Saturday, Sunday, and a public holiday. (jour ouvrable)

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