What are "red flags" in money laundering?

"Red flags" in the context of money laundering are indicators that suggest the presence of potential money laundering activities. These indicators can include unusual transaction patterns, inconsistencies in customer information, and behavior that deviates from the norm. For example, if a customer makes frequent large deposits that do not align with their stated income, this could raise a "red flag" for suspicion of money laundering.

Identifying these warning signs is crucial for financial institutions and those in compliance roles. It enables them to perform further inquiries, conduct enhanced due diligence, or file a Suspicious Activity Report (SAR) to relevant authorities. Being aware of these indicators helps to mitigate risks associated with facilitating money laundering and ensures compliance with anti-money laundering (AML) regulations.

The other options, while relevant to financial operations and regulatory compliance, do not specifically pertain to the signs or indicators of money laundering. Required disclosures refer to the necessary information that financial institutions must provide, tax compliance indicators relate to adherence to tax laws, and standard operating procedures are established methods for conducting banking operations but do not directly identify suspicious activities.