{"id":1041,"date":"2025-06-04T04:32:57","date_gmt":"2025-06-04T04:32:57","guid":{"rendered":"https:\/\/fabian-sanchez.com\/?p=1041"},"modified":"2026-05-13T16:31:43","modified_gmt":"2026-05-13T16:31:43","slug":"typologies-as-an-indicator-of-suspicious-activity-meeting-the-form-lacking-the-substance","status":"publish","type":"post","link":"https:\/\/fabian-sanchez.com\/?p=1041","title":{"rendered":"Typologies as an Indicator of Suspicious Activity: Meeting the Form, Lacking the Substance"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"1041\" class=\"elementor elementor-1041\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-41a397a e-flex e-con-boxed e-con e-parent\" data-id=\"41a397a\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-0731b03 elementor-widget elementor-widget-text-editor\" data-id=\"0731b03\" data-element_type=\"widget\" data-settings=\"{&quot;htmega_fe&quot;:&quot;no&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><img fetchpriority=\"high\" decoding=\"async\" class=\"size-medium wp-image-1040 alignleft\" src=\"https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG-241x300.png\" alt=\"\" width=\"241\" height=\"300\" srcset=\"https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG-241x300.png 241w, https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG-824x1024.png 824w, https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG-768x954.png 768w, https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG-600x745.png 600w, https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG.png 924w\" sizes=\"(max-width: 241px) 100vw, 241px\" \/><\/p><p><strong>Typologies as an Indicator of Suspicious Activity: Meeting the Form, Lacking the Substance<\/strong><\/p><p><strong>Understanding AML Typologies<\/strong><\/p><p>Anti-Money Laundering (AML) typologies are common methods, techniques, or patterns used by criminals to launder illicit funds. These typologies help financial institutions identify behaviors or activities that may signal suspicious conduct. They guide institutions in shaping monitoring systems and help staff assess whether transactional patterns warrant further investigation or reporting.<\/p><p>The Financial Action Task Force (FATF) defines typologies as &#8220;trends and methods of money laundering and terrorist financing observed by law enforcement and financial intelligence units.\u201d These patterns are not conclusive proof of illegal activity but are used as red flags to support further inquiry.<\/p><p><strong>Typologies in the Remittance Sector<\/strong><\/p><p>Several money laundering typologies apply specifically to the remittance sector. Common examples include as drawn from publications by the FATF; World Bank and Egmont Group include:<\/p><ul><li><strong>Structuring (Smurfing):<\/strong> Breaking large sums into smaller transactions to avoid reporting thresholds.<\/li><li><strong>Use of Third Parties:<\/strong> Funds are sent or received by individuals not related to the originator or recipient.<\/li><li><strong>Rapid Movement of Funds:<\/strong> Funds are received and quickly transferred across jurisdictions.<\/li><li><strong>One-to-Many or Many-to-One Patterns:<\/strong> Single sender to multiple recipients or multiple senders to a single recipient, raising suspicion of funnel accounts.<\/li><li><strong>Unusual Transaction Volumes:<\/strong> Amounts inconsistent with the sender&#8217;s profile, occupation, or transaction history.<\/li><\/ul><p>These typologies serve as monitoring triggers. However, context is necessary to determine whether they indicate criminal conduct.<\/p><p><strong>In Focus &#8211; Limitations of the One-to-Many\/Many-to-One Typology<\/strong><\/p><p>The one-to-many or many-to-one typology is commonly flagged by transaction monitoring systems. However, it does not always indicate suspicious activity. Legitimate scenarios explaining such patterns may include:<\/p><p><strong>Jurisdictional nuances<\/strong> can influence remittance behavior. In some countries, cultural practices involve pooling resources or distributing funds among multiple relatives, which reflect social norms, not illicit behavior.<\/p><p><strong>Migrant worker family dynamics<\/strong> must be considered. Migrants often support extended family, including siblings, parents, or even fund community projects. These transactions may involve multiple recipients but are rooted in familial obligations or informal business relationships.<\/p><p><strong>Immigration status challenges<\/strong> can also play a role. Migrants lacking proper documentation may rely on intermediaries to send funds. The use of friends or community members to transfer money on behalf of others can mirror a many-to-one or one-to-many pattern. The proposed &#8220;One Beautiful Bill&#8221; before the United States (U.S.) of America Senate, which seeks to tax remittances by non-U.S. citizens, could incentivize even more informal and proxy-based transfers if enacted. This may increase the appearance of suspicious patterns without reflecting actual criminal activity.<\/p><p>These realities underscore that the presence of a typology alone is insufficient to establish reasonable suspicion.<\/p><p><strong>Using Enhanced Due Diligence to Assess Reasonable Suspicion<\/strong><\/p><p>To move from form to substance, remittance entities should use enhanced due diligence (EDD) techniques to assess transactions that mirror suspicious typologies.<\/p><ul><li>Where the institution controls both the sending and disbursing ends of a transfer, it can collect critical information at both points. Origin and purpose of funds, relationship between parties, and supporting documentation can clarify the legitimacy of a transaction.<\/li><li>Assessing source of funding is essential. Financial institutions must determine whether customers have the capacity to send the amounts involved, whether in single or aggregated transactions. Proof of income and source of funds declarations assist in this evaluation.<\/li><li>Understanding common occupations and pay scales provides additional context. Knowing the expected income range for a job helps compliance officers assess if a customer\u2019s activity is consistent with their declared employment.<\/li><li>Ongoing customer screening also adds value. Negative news or sanctions alerts can support or negate reasonable suspicion.<\/li><li>Social media reviews of public profiles can offer supporting context. Public posts suggesting involvement in illicit activities may support the compliance officer\u2019s decision to escalate or disclose the transaction.<\/li><li>Finally, validating if the customer might have been included in a law enforcement request previously received could also concretize reasonable suspicion.<\/li><\/ul><p><strong>\u00a0<\/strong><\/p><p><strong>Key Takeaways and Conclusion<\/strong><\/p><ul><li>AML typologies are tools to guide monitoring but are not definitive indicators of wrongdoing.<\/li><li>The remittance sector includes unique typologies like structuring, third-party use, and one-to-many\/many-to-one patterns.<\/li><li>One-to-many\/many-to-one typologies must be assessed considering family structures, cultural norms, and immigration realities.<\/li><li>Enhanced due diligence is critical to distinguishing between suspicious patterns and actual criminal behavior.<\/li><li>Compliance teams should gather contextual information, assess financial capacity, and leverage open-source intelligence.<\/li><\/ul><p><strong>\u00a0<\/strong><\/p><p><strong>Conclusion<\/strong><\/p><p>Typologies help institutions meet AML obligations, but a pattern alone does not confirm suspicion. Money Laundering Reporting\/Compliance Officers (MLROs) within institutions in whom the duty to report suspicious activity is vested must move beyond form to examine substance. Do monitoring systems account for real-world context? Are staff trained to probe deeper than surface-level indicators?<\/p><p>A nuanced, risk-based approach\u2014supported by informed due diligence\u2014helps MLROs maintain compliance while ensuring fairness and accuracy in detecting true suspicious activity.<\/p><p>Author: <a href=\"mailto:Fabian%20E.%20Sanchez,%20JP%20|%20LinkedIn\"><em>Fabian E. Sanchez, JP | LinkedIn<\/em><\/a><\/p><p><em>CIPM, Intl. Dip. AML, CAMS, CIRM, MBA, BBA \u2013\u00a0<\/em><em>\u00a0<\/em><a href=\"mailto:fsanchez@fabian-sanchez.com\"><em>fsanchez@fabian-sanchez.com<\/em><\/a><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-63978b2 e-flex e-con-boxed e-con e-parent\" data-id=\"63978b2\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-1e7fc78 e-flex e-con-boxed e-con e-parent\" data-id=\"1e7fc78\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-065241d e-flex e-con-boxed e-con e-parent\" data-id=\"065241d\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-8e7631f e-flex e-con-boxed e-con e-parent\" data-id=\"8e7631f\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-609814d e-flex e-con-boxed e-con e-parent\" data-id=\"609814d\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-0408ab7 e-flex e-con-boxed e-con e-parent\" data-id=\"0408ab7\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-232fd1c e-flex e-con-boxed e-con e-parent\" data-id=\"232fd1c\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-ed9f9f7 e-flex e-con-boxed e-con e-parent\" data-id=\"ed9f9f7\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Typologies as an Indicator of Suspicious Activity: Meeting the Form, Lacking the Substance Understanding AML Typologies Anti-Money Laundering (AML) typologies are common methods, techniques, or patterns used by criminals to launder illicit funds. These typologies help financial institutions identify behaviors or activities that may signal suspicious conduct. They guide institutions in shaping monitoring systems and [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":1040,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,1],"tags":[27,31,35,30,36,29,34,28,32],"class_list":["post-1041","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-amlfundamentals","category-uncategorized","tag-aml","tag-banks","tag-boards","tag-compliance","tag-directors","tag-enforcement","tag-governance","tag-penalties","tag-remittance"],"jetpack_featured_media_url":"https:\/\/fabian-sanchez.com\/wp-content\/uploads\/2025\/06\/Money-Heist-TV-Series-PNG.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/posts\/1041","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1041"}],"version-history":[{"count":10,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/posts\/1041\/revisions"}],"predecessor-version":[{"id":1239,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/posts\/1041\/revisions\/1239"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=\/wp\/v2\/media\/1040"}],"wp:attachment":[{"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1041"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1041"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fabian-sanchez.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1041"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}