Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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5/19/2009 FinCEN Report Adds New Red Flags for Securities/Futures Industry Participants

FinCEN’s 15th SAR Activity Report: Trends, Tips & Issues, focuses on the securities and futures industries. A number of red flags are included that are variations on old themes (“Amounts deposited into trading account exceed customer’s annual income and net worth”), but one was new to us:

Login history of customer trade accounts from Internet protocol addresses routed through Canada, France, Iran, Jordan, Nigeria, United Arab Emirates, and United Kingdom. Filing institutions expressed concern that the account holders supposedly violated sanctions by accessing U.S. financial institutions online while in Iran. Furthermore, SAR narratives stated that deposit and withdrawal activity and unusual address connections might have indicated money laundering and/or terrorist financing.

This presumes that the reporting institution has software detecting the locations where customers are logging into trade accounts. This is not difficult any more and even common web creation packages now have features allowing the website owner to view the IP addresses of everyone entering the site. This information can be sorted by location, frequency of activities, lengths of stay, which pages are visited, etc. Although detecting certain types of suspicious activity through expensive interdiction software is probably essential for many larger institutions, there are now many bells and whistles on website construction tools that provide very serviceable solutions for smaller firms.

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