AML KYC Tutorial | Suspicious Transactions

Suspicious Transactions

Let us know more about Suspicious Transactions. As per PMLA Rule 2 (g) suspicious transaction means

a transaction whether or not made in cash which to a person acting in good faith gives rise to reasonable ground of suspicion that it may involve the proceeds of crime or
appears to be made in circumstances of unusual or unjustified complexity or
appears to have no economic rationale or bonafide purpose
gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism

In determining whether the transaction is suspicious or not, Banks needs to have regard to the indicators of suspicion. Indicative lists of such indicators are listed below:

Detection and Review

No.	Suspicion	Summary of detection and review
1	False Identity	Identification documents were found to be forged during customer verification process. The account holder was not traceable
2	Wrong Address	Welcome pack was received back as the person was not staying at the given address or address details given by the account holder were found to be false. The account holder was not traceable
3	Doubt over the real beneficiary of the account	The customer not aware of transactions in the account. Transactions were inconsistent with customer’s profile.
4	Account of persons under investigation	The customer was reported in media for being under investigation.
5	Account of wanted criminal	Name of the account holder and additional criteria (Date of birth / Father’s name / Nationality) were same as a person on the watch list of UN, Interpol etc.
6	Account used for cyber crime	Complaints of cyber-crime were received against a customer. No valid explanation for the transactions by account holder.
7	Account used for lottery fraud	Complaints were received against a bank account used for receiving money from the victims. Deposits at multiple locations followed by immediate cash withdrawals using ATMs. No valid explanation provided by the account holder.
8	Doubtful activity of a customer from high risk country	Cash deposited in a bank account at different cities on the same day. The account holder a citizen of a high risk country with known cases of drug trafficking.
9	Doubtful investment in IPO	Large number of accounts involving common introducer or authorized signatory. Accounts used for multiple investments in IPOs of various companies.
10	Unexplained transfers between multiple accounts	Large number of related accounts with substantial inter-account transactions without any economic rationale.
11	Unexplained activity in dormant accounts	Sudden spurt in activity of dormant account. The customer could not provide satisfactory explanation for the transactions.
12	Unexplained activity in account inconsistent with the declared business	Transactions in account inconsistent with what would be expected from declared business. The customer could not provide satisfactory explanation.
13	Unexplained large value transactions inconsistent with client’s apparent financial standing	Large value transactions in an account which usually has small value transactions. No valid explanation provided by the account holder.
14	Doubtful source of payment for credit card purchases	Credit card topped up by substantial cash first and then used for incurring expenses. Cumulative payment during the year was beyond known sources of income.
15	Suspicious use of ATM card	Frequent cash deposits in the account followed by ATM withdrawals at different locations. No valid explanation.
16	Doubtful use of safe deposit locker	Safe deposit locker operated frequently though the financial status of client
17	Doubtful source of cash deposited in bank account	Frequent cash transactions of value just under the reporting threshold. Cash transactions split across accounts to avoid reporting. No valid explanation provided.
18	Suspicious cash withdrawals from bank account	Large value cheques deposited followed by immediate cash withdrawals.
19	Doubtful source of foreign inward transfers in bank account	Deposit of series of demand drafts purchased from Exchange House abroad. Sudden deposits in dormant account immediately followed by withdrawals.
20	Doubtful remitter of foreign remittances	Name and other details of the remitter matches with a person on watch list.
21	Doubtful beneficiary of foreign remittances	Name and other details of the beneficiary matches with a person on watch list.
22	Doubtful utilizations of foreign remittances	Foreign remittance being withdrawn in cash immediately. No valid explanation.

No.

Suspicion

Summary of detection and review

1

False Identity

Identification documents were found to be forged during customer verification process. The account holder was not traceable

2

Wrong Address

Welcome pack was received back as the person was not staying at the given address or address details given by the account holder were found to be false. The account holder was not traceable

3

Doubt over the real beneficiary of the account

The customer not aware of transactions in the account. Transactions were inconsistent with customer’s profile.

4

Account of persons under investigation

The customer was reported in media for being under investigation.

5

Account of wanted criminal

Name of the account holder and additional criteria (Date of birth / Father’s name / Nationality) were same as a person on the watch list of UN, Interpol etc.

6

Account used for cyber crime

Complaints of cyber-crime were received against a customer. No valid explanation for the transactions by account holder.

7

Account used for lottery fraud

Complaints were received against a bank account used for receiving money from the victims. Deposits at multiple locations followed by immediate cash withdrawals using ATMs. No valid explanation provided by the account holder.

8

Doubtful activity of a customer from high risk country

Cash deposited in a bank account at different cities on the same day. The account holder a citizen of a high risk country with known cases of drug trafficking.

9

Doubtful investment in IPO

Large number of accounts involving common introducer or authorized signatory. Accounts used for multiple investments in IPOs of various companies.

10

Unexplained transfers between multiple accounts

Large number of related accounts with substantial inter-account transactions without any economic rationale.

11

Unexplained
activity in dormant accounts

Sudden spurt in activity of dormant account. The customer could not provide satisfactory explanation for the transactions.

12

Unexplained
activity in account inconsistent with the declared business

Transactions in account inconsistent with what would be expected from declared business. The customer could not provide satisfactory explanation.

13

Unexplained large value transactions inconsistent with client’s apparent financial standing

Large value transactions in an account which usually has small value transactions. No valid explanation provided by the account holder.

14

Doubtful source of payment for credit card purchases

Credit card topped up by substantial cash first and then used for incurring expenses. Cumulative payment during the year was beyond known sources of income.

15

Suspicious use of
ATM card

Frequent cash deposits in the account followed by ATM withdrawals at different locations. No valid explanation.

16

Doubtful use of safe deposit locker

Safe deposit locker operated frequently though the financial status of client

17

Doubtful source
of cash deposited in bank account

Frequent cash transactions of value just under the reporting threshold. Cash transactions split across accounts to avoid reporting. No valid explanation provided.

18

Suspicious cash withdrawals from bank account

Large value cheques deposited followed by immediate cash withdrawals.

19

Doubtful source of foreign inward transfers in bank account

Deposit of series of demand drafts purchased from Exchange House abroad. Sudden deposits in dormant account immediately followed by withdrawals.

20

Doubtful remitter of foreign remittances

Name and other details of the remitter matches with a person on watch list.

21

Doubtful beneficiary of foreign remittances

Name and other details of the beneficiary matches with a person on watch list.

22

Doubtful utilizations of foreign remittances

Foreign remittance being withdrawn in cash immediately. No valid explanation.

Bank Guidelines regarding Suspicious Transaction Reports (STR)

While determining suspicious transactions, banks should be guided by definition of suspicious transaction contained in PMLA Rules as amended from time to time.
It is likely that in some cases transactions are abandoned/ aborted by customers on being asked to give some details or to provide documents.
It is clarified that banks should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.