Money Transmitters may be Money Laundering Vehicle

The vast majority of companies in the United States that make up the money services businesses (MSB) industry recognize that the products and services they provide may be vulnerable to abuse. As reported in the Industry Forum section of the June Issue of the SAR Activity Review, some of the national MSBs, including the leading money transmission services, money order and traveler's checks issuers, check cashing businesses and currency exchange providers have developed internal systems to detect suspicious activity.

Since the inception of the SAR reporting requirements in April 1996, MSBs have voluntarily filed more than 14,000 reports of suspicious activity and they have taken other steps to prevent and detect possible money laundering activity, including imposing customer identification requirements at thresholds below current regulatory requirements and closing sales locations where appropriate. In addition, SARs have been filed by banks on financial activity associated with licensed and unlicensed MSBs every year. The factual situations outlined below are provided as examples of scenarios that have been reported as suspicious by money transmitters . The next issue of the SAR Activity Review will focus on and summarize the reports of suspicious activities filed by depository institutions.

Overview: SARs filed by money transmitter companies, both primary companies (companies that own a money transmitter business) and agent businesses (companies that act as agents), indicate that there are many varied patterns of suspicious activity involving money transmitter companies. Primary among those are customer attempts to disperse transactions and circumvent record keeping dollar amount thresholds. Reports of suspicious activity include:

transactions structured in dollar amounts below record keeping requirement thresholds;
multiple customers (senders and/or receivers) sharing common identifiers (last names, street addresses, telephone numbers);
single send customers using multiple addresses;
successive funds transfers being sent (often a few minutes apart) in the same dollar amounts structured under record keeping thresholds;
transactions conducted by a group or cluster of groups of customers;
single send customer going to different agent business locations in a limited time period (e.g., one afternoon); and
occupations listed for customers that would not seem to justify the level of financial activity.

SARs Filed by Money Transmitters: Money transmitter companies are voluntarily filing SARs on customer transactions attempted, initiated or concluded at agent business locations (e.g., grocery store; liquor store; gas station). These filings reveal many varied and complex patterns of activity that appear to involve customers dispersing their transactions and/or structuring dollar amounts of the funds transfers in an attempt to avoid the dollar threshold for required record keeping. While there are many variations of the reported suspicious activities, the following patterns are intended to serve as representative samples.

The primary methods by which the customers of money transmitters appear to disperse and structure transactions to avoid the record keeping requirement thresholds (e.g., below $3,000 or in some instances thresholds of $1,000 imposed by policies of primary money transmitter companies) fit within a combination of the categories listed below:

multiple send customers send funds transfers to the same receiver or multiple receivers;
a single send customer sends multiple funds transfers to the same receiver or multiple receivers;
transactions involving successive funds transfers (often sent a few minutes apart);
transfers being sent in same dollar amounts structured below record keeping requirements;
multiple senders and/or receivers sharing common identifiers (e.g., last names, street addresses, telephone numbers--sometimes with slight variations);
transactions that involve multiple send customers often appear to be conducted, at least on the sending side, at the same agent business office;
transactions involving multiple send customers in a suspicious group or a cluster of groups (discussed further below);
transactions involving a single send customer going to different send agent business locations (discussed further below);
a single send customer using more than one address and/or suspected false address(es).

Example of Basic Structuring Attempt:

One pattern involves obvious attempts by a customer(s) to structure transactions below the record keeping/reporting thresholds. In one example, a customer had sent 11 money transfers (totaling $103,000) to 10 receivers in Nigeria. Two days later, the same customer attempted to send $157,000 (in 18 transactions structured under the CTR threshold) to multiple receivers in Nigeria. After the primary money transmitter company refused the transactions and explained recording/ reporting requirements and pay out restrictions to the customer, the customer then attempted to send eight individuals (his employees) to the same agent business location to send funds to Nigeria on his behalf. These transactions were also refused by the primary company.

Example of Suspicious Activity on the Receive Side:

Suspicious activity has been reported on the receive side of the funds transfer. One money transmitter reported that a receive customer collected numerous funds transfers in a total amount of approximately $66,000 from 36 senders, over a twomonth period. The receive customer listed two different addresses as his primary residences and typically collected multiple transfers on the same day, but picked up the funds transfers at different agent business locations. The transfers were usually sent in structured amounts. The reporting money transmitter company cited the number of senders, structured dollar amounts, and use of different permanent addresses by the receive customer as contributing to the suspicious character of the activity.

Example of a Single Customer Going to Multiple Agent Business Locations:

One suspect customer in one afternoon went to several different U.S.-based agent business locations (of the same money transmitter). At different agent locations, that customer initiated successive, multiple funds transfers in amounts below the record keeping threshold to several receive customers (or sometimes a single receive customer) located either domestically or abroad.

Excerpted from SAR Activity Review Issue 3, page 17