WHAT IS TIPPING OFF IN FINANCIAL INSTITUTIONS?

Written by: WAHEED ZAMAN

It seems as with every passing day, positivity & negativity are becoming two parts of the same coin. On the one hand, we have an ever prospering & developing world of science & technology & on the other hand, an insecure world surrounded by probabilities, risks, dangers & crimes.

Under this ever prospering & vulnerabilities umbrella, financial institutions seem to be in the line of fire. On no choice basis, they are under obligation to discharge their services, they interact with millions of people in a day, where this opportunity gives them a chance to grow their businesses at par, simultaneously, it also extremely exposes them towards risks.

Keeping in view all the above dangers, risks & vulnerabilities, we will be discussing here, what is tipping off? What are its impacts? What FI’s should do to resolve this?

WHAT IS TIPPING OFF IN FINANCIAL INSTITUTIONS?

As we discussed earlier that FI’s interact with millions of people in a day, A large number of customers use this channel (of financial institutions) for their day to day financial needs but a few of them constantly try to use this means of transaction for their vested interests & keep an eye on the available loopholes to exploit it for their dirty money.

This dubious & negative action on their part makes the international financial system facilitating vehicles, which proves to be lethal for people & societies at large. Hence the roles & responsibilities of FI’s & its people have comparatively increased, which further requires them to exercise extra care while dealing & interacting with such suspicious elements.

WHAT IS TIPPING OFF?

Tipping off is the process of " letting suspicious customers know that, they are. Or they might be, under any suspicion, due to their account activities, further, that can lead to inquiries, investigations, imprisonments or punishments ",

Tipping off can be both, knowingly or unknowingly, As responsible professionals or institutions, it is our collective responsibility to handle the matter with utmost care & also make our human resources fully equipped to cope with the situations efficiently & effectively.

We must take into account the glaring fact that this could be done at any stage, it may be at the early, middle, and late stages.  There is only a need to apply controls & ensure the situation remains under control & in hand.

We must inculcate in them (staff) that tipping off to criminals is itself a Crime, It is an offense & has far lasting negative impacts on FI’s, regulators, governments & last but not the least, the international financial system. The act of Tipping off can jeopardize staff & institution at worst. Individual negligence cannot be condoned at the cost of the whole society & system.

It is not necessary that only staff dealing with customers may Tipp off to money launderers, there is an imminent chance that staff other than direct dealing may also Tipp off of to them. So there is a need to define the roles & responsibilities clearly.

IMPACTS & IMPLICATIONS OF TIPPING OFF?

This is a principally agreed narrative that tipping off is an offense & has very negative impacts on the health of both society & the international financial system.

When criminals are informed or startled, they become alert, proactive & act accordingly. They dodge the system by exploring other options. They change their course of action, arrange to move their funds from one institution to another or from one jurisdiction to another jurisdiction. In other words, they easily get away with their ill-gotten money from the grip of law.

The act of tipping off provides them with breathing space & enables them to continue malicious activities from different locations with new techniques.

WHAT FINANCIAL INSTITUTIONS SHOULD DO TO CONTROL IT?

Keeping in view the versatilities & innovations in the world of crimes, FI’s has to come out of this illusion that all is well & systems are in place to ensure necessary checks & balances. They must introduce robust organized mechanisms within institutions to address & mitigate the risk.

FI’s must spot black sheep within the institutions, acting as a facilitator to all criminals, i-e money launderers, tax evaders, human traffickers, drug traffickers.

Staff must be made aware that as responsible institutions, we must abstain from activities in question & instead cooperate with regulators, financial monitoring units & law enforcement agencies to curb criminal activities for once & all.

DEVELOP & SHARE ADVISORY GUIDE WITH STAFF:

Staff must be made aware of the sensitivity of money laundering, terrorist financing & proliferation financing.

FI’s must develop an advisory program for their staff to know the INS & OUTS of tipping off as they may not fall prey to this heinous crime. This advisory guide should consist of all necessary circulars, red flags, warnings, & study cases.

Staff must be guided through pieces of training & should know how to contact customers against justification of any transaction alert generated or any anti-money laundering exercise to be completed.

• Staff must approach a suspected money launderer in such a way that must not trigger an alert or clue to them. FI’s must develop a standard communication one-pager, addressing all the scenarios/situations such as in case of normal routine transactions explanation, inquiries covering large pattern transactions mismatching with reported profile & all other transactions required to be reported under suspicious activity report (SAR) or Suspicious transactions reporting (STR).

Staff often use unguarded traditional words & letting money launderers know that they were contacting them as their transactions were not matching with their current profile & required their explanation to complete the exercise for further submission or reporting to the regulator.

Staff must refrain from such open communication with suspicious customers instead make them feel that justification was required for the completion of routine internal work.

It has been observed that due to the unavailability of such guided procedure or lack of knowledge criminals get hints from staff communication & become alert to shelter themselves under safe heavens.

When STR or SAS is filed against any money launderers, the onus of the responsibility increases & the same must be cascaded down the line to only concerned staff & they should be significantly taken on board to deal customers in such a way that they must not receive any signal due to possible delay or altogether rejection of their transactions. They must be clearly conveyed the message of keeping suspicious customers engaged till action from concern quarters against them.

FI’s must make their staff familiar regarding law of the land with regards to the willful failure or refusal to provide assistance to regulators, tax authorities & law enforcement agencies. They must be made aware of the physical & monetary punishments too.

This organized exercise of letting our professional know about “tipping off “will finally enable us to make our staff & financial institutions free from all imminent risks at large.