CAMS · Question #408
What are some red flags financial institutions should be aware of when trying to verify the identity of a customer? Choose 3 answers
The correct answer is A. Customer having unusual documents from a foreign country B. Customer being new to the community C. Customer having no permanent address. Financial institutions conducting identity verification must watch for red flags including suspicious or unverifiable documents, lack of community ties, and absence of a permanent address, all of which impede reliable KYC checks.
Question
What are some red flags financial institutions should be aware of when trying to verify the identity of a customer? Choose 3 answers
Options
- ACustomer having unusual documents from a foreign country
- BCustomer being new to the community
- CCustomer having no permanent address
- DCustomer not having a connected phone
How the community answered
(27 responses)- A81% (22)
- D19% (5)
Why each option
Financial institutions conducting identity verification must watch for red flags including suspicious or unverifiable documents, lack of community ties, and absence of a permanent address, all of which impede reliable KYC checks.
Unusual or difficult-to-verify documents from foreign countries can indicate identity fraud or an attempt to obscure the customer's true origin, a recognized red flag under KYC and CDD guidance.
A customer who is new to the community may have limited verifiable history, references, or local records, making accurate identity verification harder and increasing the risk of fraudulent account opening.
Lack of a permanent address is a classic KYC red flag because it prevents reliable identity confirmation, makes ongoing customer monitoring difficult, and is associated with higher financial crime risk.
Not having a connected phone is not a standard AML or KYC red flag recognized in regulatory guidance, as many legitimate customers may not have mobile service or may choose not to provide a number.
Concept tested: KYC identity verification red flags in AML compliance
Source: https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Guidance-on-Customer-Due-Diligence.html
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