CAMS-FCI - Advanced CAMS-Financial Crimes Investigations

The next best course of action for the investigator is to file a SAR/STR on the account activity in relation to a potential funnel account. This is because a funnel account is a type of money laundering scheme that involves depositing funds from multiple sources into a single account, and then transferring them to another account, often in a different jurisdiction. A funnel account can be used to conceal the origin, ownership, and destination of illicit funds, and to evade currency transaction reporting requirements. The investigator should report the suspicious activity to the relevant authorities and document the findings and actions taken. The other options are incorrect because:

A. Completing the monthly review and noting the activity for next month’s review is not sufficient, as it delays the reporting of a possible money laundering scheme and exposes the financial institution to regulatory and reputational risks.

C. Recommending the account for exit due to frequent global transactions is not appropriate, as it does not address the underlying issue of potential money laundering and may alert the customer of the investigation.

D. No further action is required as the customer is already rated at high-risk and the monthly spending is within expectations is not acceptable, as it ignores the red flags of a funnel account and fails to comply with the anti-money laundering obligations of the financial institution.

References:

Advanced CAMS-FCI Certification | ACAMS, Section 2: Investigating Financial Crimes, page 9

Leading Complex Investigations Certificate | ACAMS, Module 2: Identifying Red Flags, page 5

The initial focus of the investigation should be to review the customer due diligence documents of each entity and examine the year of incorporation and onboarding channel, as this would help identify the beneficial owners, the source of funds, and the purpose of the business relationship. This would also help determine if the entities are shell companies or have any red flags that indicate potential misuse of legal persons. Using data analytics to extract and analyze the linkages between the different entities would be a subsequent step, not the initial one. Conducting a network link analysis on all customers of the bank would be too broad and time-consuming. Finding out whether customer A has relationships with other financial institutions would be relevant, but not the initial focus. References: [Advanced CAMS-FCI Study Guide], page 44-45; [FATF Guidance on Transparency and Beneficial Ownership], page 12-13.

The data points that the compliance team should include in its data analytics program to detect shell or front company red flags are entities whose principal place of business is a non-residential address and entities transacting with or having relation to tax haven or high-risk countries. These data points may indicate that the entities are not conducting legitimate business activities, but rather are used to conceal the identity or location of the true beneficiaries or owners, or to facilitate money laundering, tax evasion, or other illicit activities. Some of the sources that support these data points as red flags are4567:

• Entities whose principal place of business is a non-residential address may indicate that they have no physical presence, operations, assets, or employees. They may use addresses such as post office boxes, mail forwarding services, registered agents, or virtual offices to avoid detection or scrutiny.
• Entities transacting with or having relation to tax haven or high-risk countries may indicate that they are involved in offshore financial activities that are designed to evade taxes, regulations, or sanctions. They may also be exposed to higher risks of money laundering, terrorist financing, corruption, or fraud.

References:

• How to Identify a Shell Company and the Associated Red Flags
• Difference between Shell, Shelf & Front Company | Sigma Ratings
• Shell Companies and Money Laundering | ComplyAdvantage
• General Comments Incorporation of shell companies - Singapore Police Force