ISLAMABAD: Financial Monitoring Unit (FMU) has issued 'red flag indicators' covering individual profiles, transactional channels and patterns, which may help the financial institutions in detections of transactions relating to proceeds generated through drug trafficking.
In this regard, the FMU has issued instructions to all reported entities/financial institutions for detection of financial activities related to drug trafficking through the prescribed Red Flags.
According to the FMU, these red flags are intended to aid the financial institutions and a combination of these red flags, in addition to analysis of the customer financial activity, profile and current transactional pattern may indicate a potential financial activity related to drug trafficking.
In order to identify a suspicion that could be indicative of Money Laundering (ML) or Terrorism Financing (TF) activity through drug trafficking proceeds, FMU has prepared the red flags indicators that are specially intended as an aid for the reporting entities, which are attached as “Red Flags Indicators for Financial Activities related to Drug Trafficking”.
The FMU stated that the individuals of origin of drug producing jurisdiction remitting money for family support, Nongovernmental organizations (NGOs) engaged under cover of relief works for Refugees, construction and development business near bordering areas, general traders, import/export companies engaged in business with drug producing high risk countries may be potentially be involved in drug trafficking business. However, the client's overall profile in addition to analysis of the customer financial activity, profile and current transactional pattern may indicate a potential drug trafficking activity.
The red flags relating to the transactional channels revealed that the foreign currency exchange transactions carried out by non-resident individuals over a short period of time, and transfers are made through non-banking remittance systems i.e., Money transfers which are not related to business, investment activity or real estate purchase done by non-resident individuals through funds originated from foreign jurisdiction.
The customer making deposits/withdrawals or otherwise generally operates an account accompanied or on instructions by a third party and newly opened customer account seems to be controlled by a third party, including forms completed in different handwriting and/or the customer is not sure about the address provided in the form.
Other red flags indicators revealed that the frequent outbound wire transfers, with no apparent business or lawful purpose, directed to countries with a higher risk for drug production, drug transit and drug consumption or to countries inconsistent with the customer’s expected activity and the cross-border transfers of funds to the same individual, financial institution or to an overseas location that are inconsistent with customers’ personal profile or stated business activity.
The red flags indicators also revealed that transactions (incl. via non-banking remittance systems) are conducted between persons who are foreign nationals of high-risk countries w.r.t. drugs trafficking or between Pakistani and foreign nationals of such high-risk countries without any plausible reason, FMU added.
Copyright Business Recorder, 2021
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