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The Face of Fraud -
How to Spot a Money Launderer


Money laundering has always been a serious concern for U.S. financial institutions. As companies become more global in their reach, it is becoming increasingly difficult for organizations to properly and efficiently monitor business dealings for signs of financial misconduct.

The ultimate goal for any company is to prevent this crime from affecting the success of their business by first detecting and then reporting valid instances of money laundering as quickly as possible.

In a recent study, Anti-Money Laundering (AML) professionals cited concerns about properly monitoring fraud due to increasing workloads, especially pertaining to the Fair and Accurate Credit Transactions Act (FACTA) and Dodd-Frank regulations.1 Companies today face a real challenge of volume – from the enormous amount of information they receive to the number of transactions that occur, the quantity of fraud, and the speed of fraudulent activity.


Increased regulatory expectations continue to represent the greatest AML compliance challenge, cited by over 60% of respondents to the ACAMS/Dow Jones survey.


Increased regulatory expectations continue to represent the greatest AML compliance challenge, as detailed in a 2015 survey by the Association of Certified Anti-Money Laundering Specialists (ACAMS) and Dow Jones.2

Regulators around the globe have made examples of many institutions with improper or inadequate AML processes, further showcasing the importance of a proper defense against financial crime.

Failure to properly institute AML procedures and processes has an expensive price tag, not just due to fines from regulators, but even more broadly because of the widespread brand damage such negative news can bring.


In simple terms, any risk assessment around money laundering can be boiled down to three crucial questions: Is a person who they say they are? Can you do business with them? Should you do business with them?

The first two questions are heavily influenced by specific data elements related to sanctions and other criminal lists. The first line of defense against money laundering is to properly analyze and incorporate criminal data from the wide variety of lists available today into a company’s AML process. These range from a sanction list to domestic and local politically exposed persons (PEP) lists. The accuracy and completeness of these lists is critical to ensuring that a company has all of the publicly available data it needs to make informed decisions about flagged individuals.

These lists can, and should, serve as a company’s first way to spot fraudsters. It is, however, often difficult to combine the knowledge from all of these various lists into one comprehensive monitoring system. Technology that can analyze, aggregate, and send alerts on this data will help reduce the time compliance specialists need to spend combing through various lists to find truly relevant data.

The media is another powerful tool that can be leveraged to ensure proper real-time tracking of the names and identities of global criminals. This includes not just traditional TV, online and print media, but also social media platforms such as Twitter® and Instagram®. These social media sources can help an organization create more timely alerts and risk triggers around adverse news.

If a certain case requires enhanced due diligence, retrieving a comprehensive public record is critical. These public records should not just include the individual’s information and previous felony or misdemeanor convictions, but also people connections, professional networks and business ownership data.

As different financial institutions have varying risk tolerance levels, it is important that each company sets thresholds that best fit their business and customer profiles; there is no one-size-fits-all approach. Organizations should carefully review their risk thresholds and alerting processes on a regular basis to ensure that their monitoring evolves as their business and client list evolves. It is critical to ensure that thresholds are not only regularly updated, but also tested, enforced and memorialized in a way that allows new employees, as well as regulators, to easily view the steps taken to update these processes.


A shortage of properly trained AML staff stands as the second greatest AML compliance challenge for 2016, according to the 2015 ACAMS/Dow Jones survey.3 With a shortage of professionals possessing the specialized skill set to properly investigate possible instances of money laundering, it’s crucial that companies take responsibility for training the right team of compliance professionals to better track their flow of money.

The human brain remains the most powerful computer in the world, but in reality, it cannot be replicated in a volume business such as AML. It’s therefore critical that compliance professionals train their team to look at financial data with a careful eye for inconsistencies in the regular, typical transaction patterns. For example, AML professionals should train staff to look for high-value round figure transactions, which are unusual when contrasted to the prior value and characteristics of any customer’s account activity.

Staff should be trained to think of funds and assets as their own hard-earned property. This way of thinking will put employees in the right mind-set to protect these funds and flag instances where transactions incur unnecessary, illogical costs. In contrast, launderers who are seeking to hide and distort the audit trail of criminal funds and assets will tolerate losses and waste funds where hard-working people would not. This extends to the use of nominee parties and offshore corporate entities, which hide others, but ultimately cost money.

As false positives can occur often when monitoring for possible financial fraud, it’s essential for compliance specialists to review all data points available about a bad actor’s identity with this same mind-set. Improved identity verification which includes not just name and previous offenses, but also business ownership and professional and personal connections to other individuals, will help increase the accuracy of any fraud investigation.

On September 30, 2015, the U.S. added 35 names to its counterterrorism blacklist. One of those names was “Sally Jones.” With a common name like this now included on the counter-terrorism blacklist, companies are seeing increasing hits or spikes from their surveillance programs, requiring manual review. The clearing of a false positive is a time-consuming process, but must be reviewed carefully given the potential penalties for engaging in transactions with listed individuals.

By cultivating a team of skeptical compliance professionals armed with the best technology tools to assist in their responsibilities, a company can create a necessary, solid second line of defense against financial fraudsters.

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Though aggregated public records and the right culture of compliance can create a solid foundation to ensure proper fraud and risk monitoring within an organization, it’s critical for your compliance team to carefully look for anomalies in the massive amount of data it reviews every day.

The globalization of the economy only adds to the large amount of financial data that needs to be reviewed by an AML team today. Add to this already extensive data set various forms of payment, currencies and rapidly changing exchange rates, and one can only begin to see the challenge companies face in tracking instances of money laundering.

AML professionals should always look out for transactions of identical value credited to an account and rapidly debited, as this is one of the most obvious indications of money laundering. As criminals tend to not pay any form of taxes on their transactions, such as an eight percent municipal tax or a nine percent federal tax, round number transactions in rapid succession are typically worth investigating. Perhaps not surprisingly, criminals tend to prefer simple math, so investigators should treat transactions ending in three or more zeros with caution.

The key to spotting possible financial fraud before it falls through the cracks is seeing the needle in the haystack – the anomaly in the typical financial data pattern of any one company.


U.S. media headlines today all too frequently tell a tale of one company or another failing to institute proper AML procedures, showcasing the very tangible longstanding negative effects these failures can have on any company – big or small. In 2014, banks paid U.S. regulators nearly seven times the amount of fines levied the previous year for AML infractions, accounting for $351 million in fines that year.4

In a December 2014 complaint by the U.S. Department of Justice on behalf of the U.S. Department of the Treasury (DOT), a $1 million civil penalty was issued against the chief compliance officer (COO) of a money services company due to failure to implement and maintain an effective AML program. The complaint also requested an order prohibiting this COO from working – directly or indirectly – for any financial institution in the future.

In 2014, the Financial Industry Regulatory Authority (FINRA) censured and fined a large U.S.-based investment and banking institution $8 million for, among other things, failure to have an adequate AML program in place to monitor and detect suspicious penny stock transactions. FINRA also fined the firm’s global AML compliance officer and suspended him for one month.

In FINRA’s official notice about this matter, the regulator stated that the case was a reminder to firms of what can happen when they lack the ability to properly monitor risks.5 Almost a year later, in August 2015, FINRA fined a financial services firm almost $1 million for supervisory failures, key among them being AML violations. FINRA not only fined the company, but also suspended and fined individual officers, including the company’s CFO, CEO and AML compliance officer, responsible for overseeing proper AML procedures.

These moves by both the Department of Justice and FINRA took the firm-wide accusations a step beyond just placing blame on the institution, highlighting the key role of individuals in management positions with a responsibility to properly train staff and ensure procedures are in place to track and investigate transactional red flags. These rulings show a clear shift towards an increase in personal liability – regulators are increasingly holding individuals accountable if they fail to do their jobs adequately. For professionals in the compliance industry, a public record of a fine and/or suspension is a nail in the coffin for their career.

Fines and suspensions from regulators have long-lasting negative financial and reputational implications for a company. What companies may not realize is that the effects of regulatory scrutiny around AML procedures can be felt in many other ways, including Merger & Acquisition (M&A) activity.

In late 2014, a large U.S. bank was forced to extend the completion date of a merger with another bank originally announced in 2012, as the U.S. Federal Reserve identified certain regulatory concerns with the bank’s AML program. The bank commenced a major initiative intended to fully address the Federal Reserve’s concerns but saw serious delays in the progress of this key merger, opening up the merger and the two companies to scrutiny from investors and partners around the globe.

These four examples further emphasize the importance U.S. regulators place on proper AML controls, often making an example of one company and its officers to warn the rest of the industry and ensure proper procedures are in place going forward.


Through a strategic approach to combine the strengths of both technology and the human mind, an organization can better ensure they have the right defense in place to monitor financial criminals.

Technology provides the first layer of defense, aggregating large amounts of public U.S. criminal data. This, coupled with a team of compliance specialists trained regularly to properly investigate possible instances of financial crime, will help financial institutions more quickly spot money laundering.

Through the unified lines of defense across effective technology, widespread organizational standards, and continuous education on proper AML procedures, a company can better ensure it is maintaining the right culture of compliance to face financial crime.

The faster an organization can spot money laundering in its accounts, the faster it can protect its clients and ultimately ensure the future success of its business.

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