AML/CFT: An Indicative List of Red Flags for Trust & Corporate Service Providers
Many Trust and Corporate Service Providers face one critical problem: they deal with clients who look normal on the surface but hide risky intentions underneath.
Spotting danger early is possible. A clear list of warning signs helps teams take the right action at the right time. The following guide by JCA’s (Jitendra Chartered Accountants) AML consultants in the UAE explains the red flags that TCSPs should watch closely to stay safe.
Why TCSPs Face High AML/CFT Risk
TCSPs help create companies, trusts, and other legal structures. Because of this, they attract customers who want privacy, fast setup, or flexible ownership. These same features also attract criminals.
They use companies and trust to hide money, transfer funds, or keep their names away from the public. For this reason, regulators classify TCSPs as high-risk.
AML compliance officers in Dubai must pay close attention to everything: the client’s identity, ownership patterns, business purpose, and money movements.
Red Flags Linked to Individual Clients
- The Client Avoids Basic Information
Some individuals refuse to share simple details about themselves. They may hide their real identity, their work history, or the real person who benefits from the company.
They avoid questions about where their money comes from. They stay vague about their business plans. They ignore requests for documents that every normal client provides.
- Strange or Suspicious Behaviour
Some clients behave in unusual ways. They may insist on using a middleman for all conversations. They may avoid all personal meetings. Once their company is formed, they disappear and stop responding.
They may also come from countries where they have no real business activity. Many also show too much interest in compliance rules, asking things that normal clients never ask.
- Risky Background or Profile
A client may carry past records of criminal activity or may be under investigation. Some may be connected to people who hold public office.
Another warning sign is when the client’s lifestyle or education does not match the size of transactions they want to make.
There are also cases where clients were stopped from holding director roles before.
AML compliance officers in Dubai should keep proper records of all old and new clients.
- Unusual Requests From the Client
Some clients push for strange setups. They want companies in low-tax countries without any real need. They want trusts or foundations in countries known for secrecy.
They ask to open several trust accounts for the same person. Or they open many trust accounts, each with a different explanation for where the money comes from.
Some want large deposits that do not match their profile. Others ask for shelf companies or shell companies to speed up activity.
Red Flags Linked to Corporate Clients
- Suspicious Jurisdiction or Structure
The client is linked to jurisdictions identified as high-risk, non-cooperative, or subject to enhanced FATF monitoring, without a legitimate business rationale. The company cannot prove its real business activity. It has no online presence. The email domain is a free one, not a business one.
The owners or directors are missing or cannot be reached. The company may use nominees with no real purpose.
The structure may be too complex for the size of the business. It may change owners often without explanation.
- Unknown People Pulling the Strings
A company may operate based on orders from people who are not listed anywhere. These hidden controllers signal danger.
Sudden changes in ownership or management without informing the TCSP are also red flags.
AML consultants in the UAE can help you identify potential red flags in your business.
Red Flags Linked to the Choice of TCSP
Some clients switch from one TCSP to another very fast. They cannot give a clear reason. In some cases, another TCSP refused to take them, and they now want someone else to accept the same request.
A client may also attempt to involve the TCSP in activities beyond its licensed scope, such as holding assets or funds on behalf of the client, which constitutes a red flag. This behaviour is suspicious and requires deeper checks.
Failure or unwillingness to disclose accurate beneficial ownership information is a key red flag under UAE AML/CFT regulations.
Red Flags Related to Funds and Transactions
- Money That Does Not Match the Client’s Profile
A person or company receives or sends money that does not match their background. The client may use many bank accounts for unclear reasons.
They may delay payments right before notarisation. Some repay loans very fast, even when there is no reason.
- Strange Activity Patterns
Some clients request changes in agreements without proper explanation.
Funds may come from lenders who are not regular financial institutions. In some cases, the collateral or the funds come from countries known for high risk.
Some clients transfer large sums to newly formed companies. Others receive money from suspicious companies abroad.
- Clear Mismatch in Financial Behaviour
When prices of securities are too low or too high with no logical reason, it is a warning sign.
When recently created companies carry out huge transactions, the activity must be reviewed.
These red flags are very crucial to ensure compliance with Anti-Money laundering laws in the UAE. AML consultants in Dubai can help you identify and manage these red flags. Under UAE AML/CFT laws, TCSPs must file a Suspicious Transaction Report (STR) or Suspicious Activity Report (SAR) whenever a red flag is identified, regardless of whether a transaction has occurred.
How can Jitendra Chartered Accountants help?
JCA is equipped with professional AML compliance officers in the UAE that help with screening of clients, goAML reporting, CDD and CRR procedures, and more. Consult our experts today to acquire expert AML services in the UAE.