Recognizing unusual transactions
As a service provider, you are aware of the practices in your industry. Determining whether a transaction is classified as unusual depends, to a great extent, on your professional opinion. Your opinion corresponds with what is considered unusual within your profession. In addition to your opinion, there are circumstances of an unusual nature which must therefore be reported.
If one of the scenarios described in the general examples below (which are not exhaustive) arises, then this is cause to further examine whether the transaction could be connected with money laundering and/or terrorist financing. If you suspect activities of money laundering or terrorist financing, then you must report it.
Red flags - identification and verification
- The Client uses (potentially) forged or counterfeit proof of ID
- It is difficult to verify the identity of the client or the UBO
- Client provides information that appears incomplete or incorrect
- Client has an unclear or changing business address/the correspondence address deviates from the regular address
- Client aborts the transaction because you ask for his/her ID
- A person besides the Buyer provides his or her ID for the purpose of the purchase
- The Client uses a front man
Red flags - relationship between client and service provider
- The services the client requires do not belong in the service provider’s normal range of services
- The Client demonstrates exceptional knowledge of anti-money laundering or anti-terrorist financing regulations or policy
- The Client is nervous for no apparent reason or cannot/does not wish to provide a specific or logical answer in relation to himself, the origin or destination of the funds and/or the parties involved in the transaction
- The usual reasons for hiring the service provider appear to be absent
- The Client is prepared to pay a substantially higher fee than usual for the services provided by the service provider
- The Client appears to have changed service providers (civil-law notary, lawyer, tax advisor or accountant) a number of times in quick succession within a short period of time, while no acceptable explanation of this can be provided
- A relationship between the client and a previous consultant appears to have been refused or terminated, while no acceptable explanation of this can be provided
- While the Client falls under the scope of the LWTF, it deliberately fails to make a report or refuses to provide information on this
- The Client is involved in transactions which do not fit in with the regular practices of its profession or operation of its company, while no acceptable explanation of this can be provided
- The Client is involved in transactions which are unusual by virtue of their scope, nature, frequency or completion
- The Client, intermediary or third party is not prepared to provide the requested information, on for example the origin of the funds or is only prepared to do so after extreme pressure
- The assignment (only) pertains to taking charge of documents or other goods or holding deposits or large sums
- A good is sold several times in a short period of time
- The Client is involved in transactions with risks knowable in advance
- The unusual, premature repayment of assets, in particular if this comes with a request to pay third parties which do not appear to have any relationship with the client
- (Cash) purchase of assets, quickly followed by loans using these assets as security
- Inappropriately mixing business use with personal use
- The Client asks the service provider to collaborate in suspected fraudulent transactions
Red flags - with respect to financial transactions
- The Client has a preference for assets that do not leave any trace such as cash funds, bearer notes and bearer policies
- Buying or selling at prices which differ significantly from market prices
- Payment transactions exhibit an unusual pattern. The funds which the client has at its disposal originate from unclear sources or the sources cited by the client are unlikely or insufficiently documented
- Sudden large payments from abroad, unusual (currency) transactions, for example for cash sums, bearer checks, bearer notes or money transfers
- The service provider receives funds from the Client with the request to transfer these funds to a third party, while there is no evidence verified by the service provider to identify the payment transfer
- Payment via any (unknown) third party or transfer of funds, if the identity of the account holder, the beneficiary of the account and/or the future investor (on whose behalf the funds are transferred) is not the same
- The loan for which security has been obtained from a foreign legal entity or private individual, in which respect the relationship with the client is unclear
- The Client uses financing outside of the normal financial sector (e.g. cash loans from abroad)
- The Client has foreign bank accounts
- The Client uses an unnecessarily complex legal company structure (e.g. foreign companies or trusts)
- The Client has assets at its disposal the origin of which is unclear
- The Client comes from outside of the region without any explanation for this
- The Client requests to make cash payments in foreign currency
Red flags - with respect to legal entities and structures
- The Client uses or wishes to use one or more interim, foreign or procured legal entities or companies without there being or appearing to be any legitimate tax, legal or commercial reasons for doing so.
- The Client wishes to found various legal entities or companies on behalf of another person, within a short space of time, without there being or appearing to be any legitimate tax, legal or commercial reasons for doing so.
- The Client wishes to found or acquire a legal entity or company with a (deliberately) dubious description of the purpose or a description of the purpose which does not appear to have any relationship with its normal professional or business operations or with a description of the purpose requiring a license to perform it, while the Client does not intend to obtain such a license, while no explanation of this can be provided which is acceptable to the service provider.
- The Client uses legal entities or companies for which the control structure is not transparent or which, in terms of nature or establishment can conceal the identity of the underlying interested party (UBO) (e.g. bearer shares, trust funds, foreign legal entities), while no explanation of this can be provided which is acceptable to the service provider
- The frequent change of legal structures and/or frequent change of Directors of legal entities or companies. There is a complex legal structure which does not seem to serve any real purpose
- Founding legal entities or companies takes a long time
Red flags - with respect to real estate and other registered property
- Transactions involving registered property financed by way of a (mortgage) loan the amount of which differs considerably from the return, while no explanation of this can be provided which is acceptable to the service provider.
- The registered property is or was traded a number of times within a short period of time with unusually high profit margins, while no explanation of this can be provided which is acceptable to the service provider.
- Transactions involving registered property to, by or via residents or companies from those countries or states which do not adequately comply with the FATF recommendations.
- Transactions that do not involve mortgage lending, in particular where the origin of the funds is unclear or of which the underlying loan agreement is not available or in which irregular loan terms and conditions are used (for example, irregular interest or security).
- Transactions involving registered property, where multiple mortgages are attached to the same premises for no apparent reason
- You can find more specific examples pertaining to your industry/profession in the left menu (see drop-down)