A bank maintains a relationship with a customer who owns a small bakery business. Which customer action indicates potential money laundering?

Question

Options

• AThe customer continually makes regular cash deposits
• BThe customer has multiple bank accounts at several locations
• CThe customer purchased property insurance that is twice the value of the business
• DThe customer recently wired a large amount to a foreign jurisdiction where family is located

• A
  5% (2)
• B
  3% (1)
• C
  13% (5)
• D
  80% (32)

Explanation

The customer purchased property insurance that is twice the value of the business indicates potential money laundering. This could be a sign of insurance fraud, which is one of the predicate offenses for money laundering. Insurance fraud involves making false or exaggerated claims to obtain illegitimate financial benefits from an insurance company. The customer may have purchased an excessive amount of insurance to cover the value of the property and then intentionally damage or destroy it to claim the insurance payout. The customer may then use the insurance money to launder the proceeds of other criminal activities.

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