Recognising Suspicious Behaviour

Recognising Suspicious Behaviour

Suspicious Client or Third Party

Here are some common suspicious behaviours that you need to be aware of when dealing with clients or third parties.

Why have they contacted us?
• Do they have a clear and distinct reason for using our organisation?
• Have they used a succession of different organisation’s before us?

Is there anything odd about the client or their instructions?
• Are they reluctant to provide documentation or making it difficult for you to verify their identity without a reasonable explanation?

• Are they suspiciously over eager to provide you with documents or will only provide you with uncertified photocopies?

• Are they unable to find time to meet you in person or insistent on only meeting you at public venues?
Is there anything odd about the client or their instructions?
• Do they appear to maintain a lifestyle that is not sustainable by what you know of their legitimate business activities?

• Do they want to use nominees, particularly family, friends or business associates, to conduct transactions on their behalf, especially where the nominee appears to be reputable but the source or ownership of funds is unclear?

• Are they seeking to appoint lawyers as directors or trustees where they seem to lack any clear function?

Red flags
• Clients who are based in or introduced by a third party based in a country where there is no effective money laundering regime or where drug trafficking, money laundering or terrorism are prevalent.
• Instructions given by a company, particularly offshore, that has no apparent commercial purpose other than to transfer assets.
• A company with little or no commercial activity, but which has a range of unconnected ‘official’ activities that could be used to mask illegal profits.
• Discrepancies between the client’s name and the name in whose account money used by the client is held.


Suspicions about client Money
Here are some common suspicious behaviours that you need to be aware of when dealing with client money.

Is there anything odd about the payment?
• Has any money been paid by or to a third party who does not appear to be connected with the client or with the transaction?

• Have payments been made into client account and after the transaction is unexpectedly aborted, a request is received to return the money or pay it to a third party?

• Has the client paid more than necessary and asked you to return the excess?
Is the payment being made with money from several different jurisdictions?

• Are large amounts of cash being offered as part of a settlement?

• Is the source of funds or the way the settlement is to take place unusual? For example, through informal money or value transfer systems, such as bitcoins, hawala, hundi, fei-chien or the black market peso exchange.

Red flags
• Money is received sooner than expected, e.g. money for the purchase of property is received well before there is any obligation to pay.

• Requests to hold money in client account in unnecessary circumstances, especially where requests are received to pay or return the money to third parties.

• A third party such as an agent instructs the firm but you do not know whom they are representing.

• Litigation or arbitration settles suspiciously easily or quickly.



Suspicious Instructions or Transactions
Here are some common suspicious behaviours that you need to be aware of when dealing with client instructions, settlements and transactions.

Is there anything odd about the instruction or transaction?
• Has the client arranged back-to-back structured loan transactions for no apparent commercial reason?

• Have you been asked to witness pre- signed or already executed documents?

• Is the client releasing false commercial information or information that is intended to manipulate the market price?
• Has your client purchased securities and asked our firm to hold them where this is not usual or appropriate?

• Has the client made large or disproportionate payments for unspecified services to consultants, related parties, employees, etc.?

Red flags
• Large sums of cash are being used in a commercial transaction.
• The instructions are outside the size or pattern of previous dealings without reasonable explanation.
• Transactions where the value of the transaction falls just short of mandatory reporting requirements.
• Investments that are made and realised in a short time span and at a loss.
• Asset or property transfers based on unusual pricing structures or which occur at inflated or very low prices compared to the market.