What are unusual transactions? (FIU2)
In our daily practice as a corporate service provider, we monitor our clients’ incoming and outgoing payments. In doing so, we have a legal obligation to identify and report unusual transactions to the FIU. What is an Unusual Transaction (UT) and how do you recognise one?
UTs
A financial transaction is unusual when there is a risk that the transaction is used for laundering criminal money or for financing terrorism. We then distinguish between two types of indicators, a subjective – and an objective indicator.
A SUBJECTIVE INDICATOR
A subjective indicator states that an institution is obliged to report if there is reason to assume that the transaction may be related to money laundering, underlying offenses or terrorist financing. The institution that must assess this and subsequently determine whether there is an UT, must therefore know its client well and be able to (subjectively) assess whether a transaction fits within the normal business operations of the client.
AN OBJECTIVE INDICATOR
In addition, there are a considerable number of objective indicators for determining whether something is an UT, and this may also differ for the various reporting entities. Very clear examples are cash transactions above a certain amount for reporting entities. As a side note, I would like to point out that paying with cash differs quite a lot between the various European countries. A good example in this context, in my opinion, is that in the Netherlands you can withdraw a maximum of €50.00 banknotes and these are accepted in shops. In many other countries, €200.00 banknotes can still be withdrawn and are fully accepted in shops. In my opinion, this clearly shows a cultural difference.
The assessment and analysis of the combination of subjective and objective reports enables the FIU to determine whether a UT is declared “suspicious” and thus becomes a Suspicious Transaction (ST). The FIU then reports this transaction to investigative authorities, such as the Public Prosecution Service.
In my next article I will elaborate further on who must report and explain the subjective and objective indicators in more detail.