A bank account is established for a new business customer. The business was established five years ago with an address in another state. The business website contains few details other than stating it is a real estate business.
One principal has an international telephone number and appears to be living in another country. The other principal works out of a recreational vehicle.
What warrants enhanced due diligence in this scenario?
Click on the arrows to vote for the correct answerA. B. C. D.
In the given scenario, several red flags are present that may warrant enhanced due diligence. Enhanced due diligence refers to a higher level of scrutiny and investigation conducted by financial institutions to mitigate risks associated with potential money laundering, terrorist financing, or other illicit activities. Let's analyze each answer choice and its relevance to the scenario:
A. Shell company: A shell company is an entity that has little to no physical presence or operations and is often used to conceal the true ownership of funds or assets. While the scenario mentions that the business website contains limited details, it does not explicitly indicate that the company is a shell company. Therefore, there is insufficient information to conclude that enhanced due diligence is warranted solely based on the presence of a new business with limited website details.
B. Human trafficker: The scenario does not provide any information that directly indicates involvement in human trafficking. While the international telephone number of one principal may raise suspicion, it is not sufficient to definitively link the individual to human trafficking. Without more concrete evidence, enhanced due diligence specifically related to human trafficking may not be warranted at this stage.
C. Politically exposed person (PEP): A politically exposed person is an individual who holds a prominent public position or has close associations with such individuals. The scenario does not mention any involvement with political positions or affiliations, making it unlikely that enhanced due diligence based on PEP status is warranted.
D. Money laundering through real estate: The scenario indicates that the business is a real estate company, and one of the principals appears to be living in another country. Real estate transactions are susceptible to money laundering due to the potential for anonymity, large financial transactions, and the ability to easily move funds across jurisdictions. The combination of a real estate business, a principal living abroad, and limited information on the company's website raises suspicions. This situation may warrant enhanced due diligence to investigate the potential risk of money laundering through real estate.
Based on the information provided, the most appropriate answer choice for warranting enhanced due diligence in this scenario is D. Money laundering through real estate. However, it's important to note that this analysis is based solely on the given information, and a comprehensive risk assessment should be conducted using additional data and factors before making any conclusive determinations.