Free CAMS ACAMS Updates

Lawyers and legal professionalsare frequently used inmoney laundering schemes, particularly throughtrust accountsthat offeranonymity and client privilege protections.

Option A (Correct):Repeated wire transfers from unknown sources followed by immediate outward transferssuggest that the lawyer’s trust accountis being used as a pass-through account for laundering funds.

Option B (Incorrect):If legal services were actually rendered,this is a normal transactionunless other risk factors exist.

Option C (Incorrect):Receiving funds from aregulated insurance companyisnot inherently suspicious, unless the transaction isinconsistent with the lawyer’s usual business activity.

Option D (Incorrect):Large transactions are normal inreal estate purchases, as long as proper documentation exists.

Red Flags in Legal Sector Money Laundering:

Use of lawyer trust accounts to move funds with no legitimate business purpose.

Frequent transactions from high-risk jurisdictions.

Transactions that are inconsistent with the lawyer’s area of practice.

Clients who refuse to disclose the source of funds.

Best Practices:

Apply AML measures to law firmshandling financial transactions, as required by FATF’sDesignated Non-Financial Businesses and Professions (DNFBPs)guidelines.

Require enhanced due diligence (EDD) for high-risk clientsandunusual transactions.

Money Services Businesses (MSBs)are commonly recognized by regulatory and supervisory authorities as havinghigher inherent AML/CFT risk, particularly due to certain business characteristics.

Option B – The prevalence of international wire transfers:

MSBs often facilitatecross-border transactions, which present a higher money laundering and terrorist financing risk due to challenges in verifying customer identity, the origin of funds, and the end destination—especially when dealing with higher-risk jurisdictions.

Option D – The cash-intensive nature of the services offered:

Many MSBs deal primarily incash, which increases the risk ofanonymous transactionsandfunds layering, making it harder to trace illicit activity. Cash is the most vulnerable medium for placement of illicit funds into the financial system.

Option AandOption E, while involving modern technologies,can actually reduce riskwhen implemented with proper controls (e.g., secure digital onboarding and traceable payments enhance auditability).

Option Cdoes not in itself signal high AML risk unless combined with other red flags.

Option A indicates potential money laundering activity by a lawyer, as it involves the use of a trust account to receive and transfer funds from unknown sources in high risk jurisdictions, without any apparent legitimate purpose or explanation. This could be a sign of layering, where the money launderer attempts to conceal the origin and ownership of the illicit funds by moving them through multiple accounts and jurisdictions. Option B does not necessarily indicate money laundering, as the source of the funds is a reputable entity and the transfer could be explained by a legitimate transaction or service. Option C does not necessarily indicate money laundering, as the bank draft could be a payment for a legal service or a settlement between parties. Option D does not necessarily indicate money laundering, as the cash deposit could be a fee for a legal service or a donation, and the amount could be below the reporting threshold to avoid unnecessary paperwork or scrutiny.

According to the Wolfsberg Principles on Private Banking, the bank should apply additional diligence to customers who present a higher risk of money laundering or other financial crimes. Some of the indicators for defining such customers are:

Persons residing in or having funds from countries with inadequate AML standards, sanctions, embargoes, or other measures that indicate a higher risk of money laundering or terrorist financing12.

Persons engaged in business activities known to be susceptible to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, art and antiquities, etc13.

Persons determined to be Politically Exposed Persons (PEPs), who are individuals who hold or have held positions of public trust or influence, or their family members or close associates, and who may pose a higher risk of corruption, bribery, or abuse of power14.

Persons who receive funds from a correspondent banking relationship are not necessarily required additional diligence, unless they fall under any of the above categories or other risk factors. Correspondent banking is a service provided by one bank to another bank to facilitate cross-border transactions, and it is subject to its own set of AML standards and due diligence measures5.