From 2010 to 2018, a company had an average turnover of 1 million USD. In 2019, the turnover increased to 8 million USD. When asked for the reason of the increase, the company claims that business increased and refuses to give any further explanation despite several attempts at requesting information. Which is the best next step?

A sudden, unexplained eightfold increase in turnover is a significant deviation from the customer's established financial profile and a major red flag. The company's refusal to provide a legitimate business explanation despite multiple requests elevates the risk and creates reasonable grounds to suspect that the funds may be related to illicit activity. In such circumstances, the obligation is to report these suspicions to the relevant Financial Intelligence Unit (FIU) promptly by filing a suspicious activity report (SAR). Delaying the report or continuing futile inquiries would be a failure to comply with anti-money laundering (AML) reporting requirements.

A. Delaying the report is inappropriate. The threshold for suspicion has already been met by the unexplained activity and the customer's evasiveness; action is required now.
B. This is futile as the prompt states the company has already refused to cooperate despite "several attempts," and continuing to ask only delays necessary reporting.
D. This passive "wait and see" approach neglects the immediate reporting obligation that arises once suspicion is formed based on the existing red flags.

1. Financial Action Task Force (FATF). The FATF Recommendations: International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation. FATF

Paris

France

2012 (updated 2023).

Recommendation 20 (Reporting of suspicious transactions): This recommendation mandates that if a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity

it must report its suspicions promptly to the FIU. The scenario presents clear grounds for suspicion. (See page 19).

2. The Wolfsberg Group. Statement on Effectiveness: Demonstrating the Effectiveness of an Anti-Money Laundering / Counter-Terrorist Financing (AML/CTF) Programme. The Wolfsberg Group

2019.

Section on Suspicious Activity Reporting (SARs): This document emphasizes the importance of timely and high-quality SARs as a critical outcome of an effective AML program. The scenario described (significant unexplained activity coupled with customer evasiveness) is a classic trigger for a SAR. (See page 4

"Key Elements of an Effective AML/CTF Programme").

3. Basel Committee on Banking Supervision. Sound management of risks related to money laundering and financing of terrorism. BCBS

2020.

Paragraph 43 (Reporting of suspicious transactions): This guidance states that banks must have policies for reporting suspicious transactions to national authorities and that such reports should be made in a timely manner. It also highlights the importance of monitoring for "unusual or suspicious transactions" compared to the customer's profile. An 800% increase in turnover is highly unusual. (See page 13).