Financial Industry “Red Flags” for Detecting Money Laundering Activity in Texas

Billions of dollars are laundered through financial institutions every single year. The Bank Secrecy Act requires that Texas financial institutions take responsibility and flag activity that appears suspicious. Regulators can impose stiff monetary penalties on banks and other financial institutions that have money laundering compliance issues. Financial firms invest significant resources into uncovering money laundering to maintain their reputation in the industry and avoid expensive fines. Most Texas financial firms have trained employees dedicated to monitoring suspicious activity.

There are several different activities and behaviors that the Texas financial industry keeps an eye on. In general, these clues relate to client behavior, source of funds, and the nature of the transactions. Below are a few common red flags relating to money laundering activity in Texas.

1. The individual provides unusual, suspicious, or inconsistent identification documents that cannot be easily verified.
2. The individual is reluctant to provide requested due diligence information in an attempt to shield the identity of beneficiaries, owners, or business activities.
3. The individual makes changes to their address, beneficiary, or ownership immediately following a large payment.
4. The individual has a background that suggests possible criminal, civil, or regulatory violations.
5. The customer has an unusual concern or interest in the firm’s compliance and reporting requirements.
6. The individual’s transactions are structured in a manner to avoid government record-keeping thresholds. For example, the individual receives frequent payments that are just below the $10,000 government reporting requirement.
7. The account has an inflow of assets that exceed the normal amount for the individual’s known income, occupation, or resources.
8. The individual has unexplained and excessive currency deposits and asks for exceptions to the firm’s policies relating to the deposit of cash and cash equivalents.
9. The individual is reluctant to proceed with a cash transaction after being informed that it must be reported, or the individual attempts to take back the portion of the cash deposit that exceeds the reporting threshold.
10. There is a rapid money movement from one bank to another, especially when other countries are involved.
11. The account has an unusual or unexplained activity. For example, there is a change in volume, frequency, or type of trades and products.
12. The account has an unusual volume of penny stock trades, regulation “S” stocks, or bearer bonds. Although these trades are legitimate, they have a history of being used in money laundering schemes.
13. The individual’s activity lacks any business sense or financial strategy. For example, there are multiple sells and buys in the same financial instrument with no concern for financial gain.
14. The individual has a lack of concern regarding risks, commissions, or other transaction costs.
15. Funds or securities are transferred into an account and are subsequently moved out of the account to a third party in the same or nearly the same amount.
16. There are transactions of investment orders on behalf of a third party from a source with no apparent connection to the customer or the name, account number, beneficiary, or remitter have not been supplied.
17. The collateral for a transaction is in a country identified as high-risk for money laundering.
18. The individual suddenly pays down or pays off a large loan with no reasonable explanation for where the funds came from.
19. The individual purchases certificates of deposit and uses them as loan collateral.

What Happens If a Financial Institution Suspects Money Laundering in Texas?

If a Texas financial institution identifies a money laundering red flag, they will conduct an investigation. If it determines there is no reasonable explanation for the suspicious activity, it must file a Suspicious Activity Report (SAR) with the Financial Crimes Enforcement Network (FinCEN) within 30 days. You will not be notified that the institution filed a SAR relating to your account.

FinCEN is a division of the U.S. Treasury that combats money laundering and related crime. FinCEN will analyze the information and, if necessary, law enforcement will begin a money-laundering investigation. If you are convicted of money laundering charges in Texas, you will be facing severe fines and jail time.

Your Sugar Land Criminal Defense Attorney

If you or a loved one has been charged with money laundering or is the target of an investigation, you should reach out to an experienced and client-focused Sugar Land criminal defense attorney. Adam Capetillo is a Fort Bend County native who will provide a skilled and aggressive defense. Call Capetillo Law Firm today for a free consultation.