Domestic banks report 148% jump in suspicious transactions

The Central Bank of The Bahamas’ (CBOB), in its analysis of anti-money laundering (AML) data returns of banks, trust companies, credit unions and money transmission businesses (MTBs), revealed that in 2020 domestic banks reported a 148 percent increase in suspicious transaction reports (STR) compared to 2019, with one bank alone reporting 70 percent of those transactions.

The report also revealed that while politically exposed persons (PEPs) held only one percent of accounts at domestic banks, 75 percent of those accounts were given a high-risk rating by the financial institution holding the account. 

For reference, the report does not correlate PEPs with the increase in suspicious transactions reported by banks.

The data revealed that domestic banks reported 506 STRs in 2020 compared to 204 in 2019, with one bank standing out in terms of reporting frequency. The report does not reveal the names of the institutions.

“One bank, for which there is no reason to believe would have a higher risk customer base, filed roughly 70 percent of these in both reporting periods,” the Central Bank states in its analysis.

“This is an instance of inconsistent industry practice, where the Central Bank intends to follow up as a supervisory matter.”

The report also revealed that instances of unusual transaction reports increased year over year from 453 in 2019 to 566 in 2020.

The report explains that the top two reasons for STRs were “unusual or suspicious transactions involving cash” and “account activity outside of profile”.

When it came to fraud, the banks reported a fourfold increase in fraud attempts in 2020, but a 64 percent decline in actual fraud occurrences compared to 2019.

In terms of PEPs, the data collected reveals that PEP accounts increased year over year from 2019 to 2020, though the deposit and loan value of those accounts decreased during that time period.

“PEPs, which tend to attract a high-risk rating and automatic enhanced due diligence, held approximately one percent of the accounts at the domestic banks in both 2020 and 2019,” the report states.

“SFIs were required to report PEPs separately and provide a breakdown of the risk rating of the PEPs in the client database. Approximately 75 percent of the accounts were rated high-risk, 23 percent were rated medium-risk and two percent were rated low-risk. In terms of relationships, approximately half of these were rated high-risk, while approximately one quarter of these were rated medium-risk and low-risk.”

The report also profiled credit unions in The Bahamas and found that they are not “inherently a high-risk”, though in 2019 the sector was found to over-classify account holders’ risk as high if they had deposits exceeding $30,000.

“This ‘over-grading’ issue was largely corrected by 2020,” the report states.

In terms of fraud, in 2019, credit unions reported 12 instances of actual and 14 instances of attempted fraud, while “no credit union reported any fraud activities for 2020”.

“Leaving aside tighter anti-fraud procedures, extensive COVID-19 related business restrictions may have made 2020 an outlier on this measure,” the report explains of 2020 fraud.

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source https://thenassauguardian.com/domestic-banks-report-148-jump-in-suspicious-transactions/