Scenario:
A real estate agent at a financial institution notices a series of unusual transactions involving a new client. The client, who recently opened an account, has been involved in multiple real estate purchases and sales within a short period. These transactions involve properties that are either significantly over- or under-valued. Additionally, the client frequently uses cash for large down payments and has been receiving incoming foreign wire transfers from a country known for high levels of financial secrecy.
Options for Course of Action:
Proceed with Transactions: Continue facilitating the real estate transactions without further inquiry, assuming the client is simply an active investor.
File a Suspicious Transaction Report (STR): Report the transactions to the relevant authorities due to their unusual nature and potential indicators of money laundering.
Conduct Enhanced Due Diligence (EDD): Investigate the client’s source of funds, the nature of their business, and the rationale behind the rapid buying and selling of properties.
Seek Clarification from the Client: Contact the client directly for explanations regarding the nature of these transactions and the source of funds
Solution with Rationale:
The most prudent course of action would be a combination of options 2 and 3: filing an STR and conducting EDD. The rapid turnover of real estate properties, especially those with valuation discrepancies, combined with large cash payments and foreign wire transfers from a high-risk country, are strong indicators of potential money laundering. Filing an STR is necessary to comply with AML regulations, and conducting EDD will provide a deeper understanding of the client’s activities and financial background