Uncover Hawaladars Hidden in Your Wires.

I want to introduce a new, or at least unusual wire transfer surveillance concept that can lead to some interesting cases.

The heart of the technique is looking for individuals that have a higher than average number of unique counterparties. I wish I could take credit for this concept, but I can't. Dr. Michael Recce introduced the concept one day over lunch. (OK, I admit it, we're nerds. We'd spent the morning talking about automated monitoring of trade finance, and for a change of pace we shifted back to regular AML surveillance concepts.)

At this point you're wondering why the number of counterparties would mean anything. Let me ask you this; how many wire transfers have you received in your personal account this month? This year? Ever?

For purposes of this post, I've applied the concept strictly to wire transfers.

The basic drill is as follows;

1. Using, rules, filters, or queries, identify account holders with a higher than average number of unique counterparties. Alternatively, you could 'band' the number, or use specific number ranges. (for example; how many accounts have between 30 and 50 unique wire counterparties?)
2. Review the wires; wire instructions, OBI info, detailed counterparty information. Confirm that your account holder in fact has a bunch of unique counterparties, and become familiar with the details of the transactions.
3. Ask “Do the transactions make sense for the account holder?” For example, the account holder is running a business out of their personal account (you'll have to chat with them about that anyway), the invoice numbers and descriptions are all consistent with each other.
4. Ask the account holder to explain the business nature or the underlying reasons for the transactions.

Variations on the drill might look at

1. counterparty country. Are the countries as diverse as the counterparties? What portion of the counterparty countries are high risk countries in your institution's risk assessment?
2. Looking at wire roles separately; number of unique originators where the account-holder is the beneficiary is one slice, and number of unique beneficiaries where the account-holder is the originators is another slice. Same kind of wire profiling applies in both cases.
3. Forget about counterparties entirely and just look at number of counterparty countries

Here's an example ripped from the headlines, as they say.

I've liberally borrowed from the details of an Iranian sanctions case involving Dr. Mahmoud Banki, who recently won, at least in part, an appeal of his conviction for having run an unlicensed money remitter and violating Iranian sanctions in the process.

Dr. Banki (he has a doctorate in chemical engineering, and worked as a management consultant.) was the beneficiary of 56 wire transfers from 44 unique entities. Here's a quick profile of the wires:

• 56 wire transfers in amounts between $2600 and $199971, total value $3,400,000.
• 9 wires for $10,000 or less
• 41 wires between $10,000 and $100,000
• 6 wires for more than $100,000
• Majority of originators were individuals
• Some originators were business entities, including
• Hillmarcs Construction Corp. (Philippines),
• United Gulf Exchange Company (Kuwait),
• Torgovy Dom Atlanta (Russia),
• Trenton Group, LLC (Latvia).
• Unusual wire instructions
• “contract for pistachios”
• “tomato paste and transportation”

1. Identifying a customer with an unusual number of unique counterparties. Of course, in this instance, the case focuses on Dr. Banki for us. In your own institution, you would have to develop a query or filter that captures a beneficiary customer with multiple distinct originating parties. If you don't create a 'party' profile in your wire data respository, go for the simple substitute: profile on unique originating party account numbers.
2. Reviewing the wires to understand the transactions. Again, done for us in the court case. In your own institution, it's business as usual for any investigator or analyst that has worked on wires in the past.
3. Do the wires make sense on their face, for this customer? On their face, no, these don't make a lot of sense. Certainly, the OBI information about pistachios and tomato paste raise an eyebrow. United Gulf Exchange and Torgovy Dom Atlanta are basic trading/exchange houses, and Trenton Group's name certainly does clarify their business. Keeping in mind that Dr. Banki is an individual, the account is a personal account, and he's a chemical engineer, there's little that's plausible in the wire set. (How many wires have you personally received this year?)
4. Ask the customer to explain the underlying business nature or reason for the transactions. As it turns out, of course, Dr. Banki had no direct business relationship with any of the originators, and was not the ultimate beneficiary of the wire transfers. His role was as an intermediary party between the originator, an Iranian hawaladar, and the ultimate beneficiaries.

This type of surveillance is tailor made for identifying parties involved in the placement of funds from a variety of sources into a single account. Whether that's an unlicensed money remitter, a 'consolidator' for funds (whether those funds are from criminal sources, or they are destined for criminals or terrorists), or the professional money launderer.

To make it work effectively in your own shop;

1. Find a way to identify, profile and work with the number of counterparties for each customer.
2. Focus on individual (personal) accounts initially.
3. Start with wire transfers
4. Start with the originating party as the counterparty.
5. Establish absolute number bands until you can build a profile distribution.
6. Test, test, test.

Happy hunting!