46. A bank is completing a periodic KYC profile review for a customer that is a small digital marketing company based in New York City. Which of the following would be a red flag?
Answer: C
The account activity includes deposits made in multiple branches around New York City into the same account.
This pattern of account activity raises a red flag as it may indicate potential structuring or smurfing, which are tactics often used to evade detection of suspicious financial behavior.
A) The account activity includes frequent purchases of tickets to industry conferences and other events.
This activity is typical for a digital marketing company and does not inherently suggest suspicious behavior. Attending industry conferences is a common practice for networking and professional development, making this option unlikely to be a red flag.
B) The account activity includes deposit activity into both savings and checking accounts.
Depositing into both savings and checking accounts is a normal banking practice and not indicative of any suspicious activity. This behavior does not raise concerns in the context of KYC reviews.
C) The account activity includes deposits made in multiple branches around New York City into the same account.
This behavior is a red flag as it may suggest a strategy to avoid detection, commonly known as smurfing, where smaller amounts are deposited in multiple locations to avoid triggering reporting requirements. This could indicate potential money laundering activities.
D) The account activity includes incoming funds transfers at irregular intervals from small businesses located in New York.
While irregular intervals may raise some questions, the source of funds being small businesses within the same geographic area does not in itself constitute a red flag. This could be a normal business practice depending on the nature of the transactions.
Conclusion
The correct answer, which highlights deposits made in multiple branches into the same account, reflects behavior that is often associated with attempts to obscure the origins of funds. Other options either represent normal business activities or do not exhibit the same level of risk, reinforcing why C is the only clear red flag in this scenario.