Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR)

 Generally, STR/SAR means a formatted report of suspicious transactions/ activities where there is a reasonable ground to believe that funds are the proceeds of crime or may be linked to money laundering or terrorist financing, insider trading & market manipulation related activity or the transactions do not seem to be usual. Such unusual activities or transactions must be reported to competent authorities. Herein the competent authority refers to Bangladesh Financial Intelligence Unit (BFIU) as per MLPA, 2012 and ATA, 2009 (including amendment of 2012).

Section 2(z) of Money laundering Prevention Act, 2012 defines Suspicious Transaction as follows: “Suspicious Transaction” means such transactions – That deviates from usual transactions; With regards to any transaction there is ground to suspect that (1) the property is the proceeds of an offence, (2) the financing of terrorist activities, a terrorist group or an individual terrorist' Any transaction or attempted transaction that are delineated in the instructions issued by Bangladesh bank from time to time for the purpose of this Act. 

Section 2(16) of ATA, 2009 (including amendment of 2012) defines Suspicious Transaction as follows: “Suspicious Transaction” means such transaction – (i) which is different from usual transactions; (ii) which invokes presumption that - (a) it is the proceeds of an offence, (b) it finances to terrorist activities, a terrorist group or an individual terrorist; (iii) which is any other transactions or an attempt for transactions delineated in the instructions issued by the Bangladesh Bank from time to time for the purposes of this Act; 

Importance of STR/SAR

As discussed above, STR/SAR is very crucial for the safety and soundness of the CMI. The CMI should submit STR/SAR considering the followings:

•  It is a legal requirement in Bangladesh; 
•  It helps protect the reputation of CMI; 
•  It helps to protect CMI from unfounded allegations of assisting criminals, including terrorists;
•  It helps the authorities to investigate financial crimes related to money laundering, terrorist financing.

 How to identify a suspicious transaction

Transactions, whether completed or attempted, may give rise to reasonable grounds to suspect that they are related to money laundering or terrorist financing, insider trading & market manipulation related activity regardless of the sum of money involved. There is no monetary threshold for making a report on a suspicious transaction. A suspicious transaction may involve several factors that may on their own seem insignificant, but together may raise suspicion that the transaction is related to the commission or attempted commission of a money laundering offence, a terrorist financing offence, insider trading & market manipulation related offence. As a general guide, a transaction may be connected to money laundering or terrorist financing when it (or a group of transactions) raises questions or gives rise to discomfort, apprehension or mistrust.  

The context in which the transaction occurs or is attempted is a significant factor in assessing suspicion. This will vary from business to business and from one client to another. Evaluation of transactions should be done in terms of what seems appropriate and is within normal practices of CMI business, and based on CMI's knowledge of their client. The fact that transactions do not appear to be in keeping with normal industry practices may be a relevant factor for determining whether there are reasonable grounds to suspect that the transactions are related to money laundering or terrorist financing, insider trading & market manipulation related activity. An assessment of suspicion should be based on a reasonable evaluation of relevant factors, including the knowledge of the client’s business, financial history, background and behavior. It should be remembered that behavior is suspicious, not people. Also, it could be the consideration of many factors—not just one factor— that will lead to a conclusion that there are reasonable grounds to suspect that a transaction is related to the commission or attempted commission of a money laundering or terrorist financing, insider trading & market manipulation related offences.

Any transaction seems to be suspicious in terms of the nature, activity, volume, complexity etc., or significantly mismatch with client's declared information. It also depends on the prudence of concern official of CMI. If s/he does not get satisfactory answer for any unusual or suspicion, it should be reported and/or recorded. Important note is that suspicion may not arise only at the time of transaction but also may be arised at the time of completing KYC and attempted transaction.  

 Suspicion Indicators

The following are examples of common indicators that may point to a suspicious transaction, whether completed or attempted as explained below:

·        Client provides false information or information that seems unreliable.

·        Client offers money, gratuities or unusual favors for the provision of services that may appear unusual or suspicious.

·        It is observed that a client is the subject of a money laundering, terrorist financing, and insider trading or market manipulation related investigation.

·        It is known from a reliable source (that can include media or other open sources), that a client is suspected of being involved in illegal activity.

·        A client name listed under UN or Local sanctions list.

·        A new or prospective client is known to you as having a questionable legal reputation or criminal background.

·        Transaction involves a suspected shell entity (that is, a corporation that has no assets, operations or other reason to exist).

·        Client attempts to convince employee not to complete necessary   documentation required for the transaction/CDD process.

·        Client makes inquiries that would indicate a desire to avoid reporting.

·        Client has unusual knowledge of the law in relation to suspicious transaction reporting.

·         Client is quick to volunteer that funds are “clean” or “not being laundered.”

·         Client appears to be collaborating with others to avoid record keeping,

·        Client identification or reporting thresholds.

·         Client provides doubtful or vague information.

·         Client produces seemingly false identification or identification that appears to be counterfeited, altered or inaccurate.

·         Client refuses to produce personal identification documents.

·         Client only submits copies of personal identification documents.

·         Client wants to establish identity using something other than his or her personal identification documents.

·         Client’s supporting documentation lacks important details such as a phone number.

·         Client inordinately delays presenting corporate documents.

·         All identification presented is foreign or cannot be checked for some reason.

·         All identification documents presented appear new or have recent issue dates.

·         Client presents different identification documents at different times.

·         Client alters the transaction after being asked for identity documents.

·         Client presents different identification documents each time a transaction is conducted.

·         Accounts that have been inactive suddenly experience large investments that are inconsistent with the normal investment practice of the Client or his/her financial ability.

·         Any dealing with a third party when the identity of the beneficiary or counterparty is undisclosed.

·         Client attempts to purchase investments with cash.

·         Client admits or makes statements about involvement in criminal activities.

·         Client does not want correspondence sent to home address.

·         Client appears to have accounts with several financial institutions in one area for no apparent reason.

·         Client repeatedly uses an address but frequently changes the names involved.

·         Client shows uncommon curiosity about internal systems, controls and

Policies

·        Client presents confusing details about the transaction or knows few details about its purpose.

·        Client appears to informally record large volume transactions, using unconventional bookkeeping methods or “off-the-record” books.

·        Client over justifies or explains the transaction.

·        Client is secretive and reluctant to meet in person.

·        Client is nervous, not in keeping with the transaction.

·        Client is involved in transactions that are suspicious but seems blind to being involved in money laundering activities.

·        Client’s home or business telephone number has been disconnected or there is no such number when an attempt is made to contact Client shortly after opening account.

·        Normal attempts to verify the background of a new or prospective Client are difficult.

·        Client appears to be acting on behalf of a third party, but does not tell you.

 Client insists that a transaction be done quickly.

·        Inconsistencies appear in the Client’s presentation of the transaction.

 The transaction does not appear to make sense or is out of keeping with usual or expected activity for the Client.

·        Client appears to have recently established a series of new relationships with different financial entities.

·        Client attempts to develop close rapport with staff.

·        Client uses aliases and a variety of similar but different addresses.

·        Client spells his or her name differently from one transaction to another.

·        Client uses a post office box or General Delivery address, or other type of mail drop address, instead of a street address when this is not the norm for that area.

·        Client uses securities or futures brokerage firm as a place to hold funds that are not being used in trading of securities or futures for an extended period of time and such activity is inconsistent with the normal investment practice of the Client or their financial ability.

·        Client wishes monies received through the sale of shares to be deposited into a bank account rather than a trading or brokerage account which is inconsistent with the normal practice of the Client.

·        Client frequently makes large investments in stocks, bonds, investment trusts or other securities in cash or by cheque within a short time period, inconsistent with the normal practice of the Client.

·        Client makes large or unusual settlements of securities in cash

·        The entry of matching buying and selling of particular securities or futures contracts (called match trading), creating the illusion of trading.

·         Transfers of funds or securities between accounts not known to be related to the Client.

·         Several Clients open accounts within a short period of time to trade the  same stock.

·         Client is an institutional trader that trades large blocks of low priced securities on behalf of an unidentified party.

·         Unrelated Clients redirect funds toward the same account.

·         Trades conducted by entities that you know have been named or sanctioned by regulators in the past for irregular or inappropriate trading activity.

·         Transaction of very large size which may manipulate stock price.

·         All principals of Client are located outside of Bangladesh.

·         Client attempts to purchase investments with instruments in the name of a third party.

·         Payments made by way of third party cheques are payable to, or endorsed over to, the Client.

·         Transactions made by employees, or that you know are made by a relative of your employee, to benefit unknown parties.

·         Third-party purchases of shares in other names (i.e., nominee accounts).

·         Transactions in which Clients make settlements with cheques drawn by or remittances from, third parties.

·         Unusually large amounts of securities or stock certificates in the names of individuals other than the Client.

·         Client maintains bank accounts and custodian or brokerage accounts at offshore banking centers with no explanation by Client as to the purpose for such relationships.

·         Proposed transactions are to be funded by international wire payments, particularly if from countries where there is no effective anti-money laundering system.