Suspicious alerts in money laundering – the Crédit Agricole case

Abstract

Purpose The purpose of this paper is to provide an analysis of the recent Crédit Agricole case outcome, whereby the bank was found to have undertaken insufficient investigation and failed to follow through on reporting suspicious account activity, in line with AML compliance requirements. Design/methodology/approach The paper uses the two main legal documents in the Michailidis v Crédit Agricole Corporate and Investment (CACI) bank case and analyses the judgement details to discuss the implications for the banking and financial services sector on money laundering and AML compliance reporting requirements. Findings The main findings from the analysis are that banks have a greater legal responsibility towards detecting and reporting suspicious transactions than they would have previously considered. This includes identifying the source and purpose of fund transfers and establishing the beneficial ownership of recipients. Research limitations/implications The research topic is new, and therefore, analysis papers and other academic writing on this topic are limited. Practical implications The research paper has identified a number of implications to the banking sector on addressing AML deficiencies, especially the detection and reporting requirements of suspicious transactions. Social implications This paper has implications for the corporate social responsibility of banks and other financial services towards monitoring the source and use of money that is in their organisation. The paper identifies areas of legal responsibility that banks now have to manage, as part of their commitment to support the prevention of money laundering. Originality/value The originality of this paper is the current example of the Crédit Agricole case and the future legal implications for banks and financial services on suspicious transaction reporting and money laundering risk assessment.

Is tackling Trade Based Money Laundering (TBML) through stricter reporting regulation the most effective response?

“…Specific risk assessment models for TBML are still emerging, as it is a relatively a new form of activity that is being studied. One piece of research that has studied TBML risk assessment in the banking sector (Naheem, 2015a, 2015b, 2015c, 2015d) has analysed and reviewed a number of TBML cases and suggested a specific model.…”

Illicit financial flows: HSBC case study

“…There are a number of ways in which these systems can be strengthened; many of the OECD recommendations are aimed at state-level interventions but there are some areas that individual banks can engage in and support their own individual AML risk assessment processes. Recent research on trade-based money laundering (Naheem, 2015a(Naheem, , 2015b(Naheem, , 2015c(Naheem, , 2015d) identified a number of ways in which AML compliance can be strengthened within the banking sector. These included the following areas of training, technology and regulation.…”

Money laundering and illicit flows from China – the real estate problem

“…Many risk assessment systems now advocate reviewing and analysing a number of different areas of the client’s risk (Ai et al , 2010), including geographic regions, third-party associates and risks from shipping, goods and trade routes. (Naheem, 2015a, 2015b, 2015c, 2015d, 2015e, 2015f)…”

“…Many risk assessment systems now advocate reviewing and analysing a number of different areas of the client's risk (Ai et al, 2010), including geographic regions, third-party associates and risks from shipping, goods and trade routes. (Naheem, 2015a(Naheem, , 2015b(Naheem, , 2015c(Naheem, , 2015d Examples of cases using Chinese ex-officials Despite the claim that thousands of corrupt officials have been identified and suspected of laundering money to foreign jurisdictions (Xinhuanet, 2013), there have been relatively few formal cases that have been taken and which involved real estate and money laundering schemes. One such case involved a Chinese official Ms Yang, who was JMLC 20,1 the former deputy mayor of Wenzhou.…”

“…To understand the true nature of the risk, other factors need to be analysed alongside these indicators (Ai et al, 2010). Naheem (2015aNaheem ( , 2015bNaheem ( , 2015cNaheem ( , 2015d suggested four main areas of geographic risk, third-party involvement, client behaviour and transaction patterns. For example, if this model is applied within a real estate example, then the following four areas need to be considered:…”