Unusual transaction

What it means

An unusual transaction is a legal act or transaction which, because of its complexity, amount, nature or the client’s behaviour, falls outside the normal pattern and may be linked to laundering criminal proceeds or financing terrorism. The term comes from the anti-money-laundering act, AML.

The law gives examples: a transaction with no apparent economic or lawful purpose, a client who refuses to prove identity or the source of funds, unusually large cash payments, splitting payments below thresholds, transfers to high-risk countries or dealings with people on sanctions lists.

An obliged entity, including an accountant, tax adviser or auditor, must report such a transaction to the financial intelligence unit without undue delay. It must not tell the client or third parties about the report and in some cases must hold the transaction.

How it works in practice

At our firm we follow our AML programme. When taking on a client we carry out identification and verification, establish the ultimate beneficial owner and, for higher-risk profiles such as politically exposed persons, apply enhanced due diligence.

When keeping the books we notice patterns that do not fit the client’s business: large unexplained cash deposits, payments for services with no evident performance, invoices from companies with no activity or money circulating quickly between related parties.

Unusual does not automatically mean criminal. A document or contract often explains it. So we first ask the client for context and document the answers. A report follows when an explanation is missing or not credible.

What to watch out for

For obliged entities the biggest risk is inaction. Failing to report an unusual transaction is an administrative offence with heavy fines and, in serious cases, can have criminal consequences. “We did not notice” is no defence if the signs were recognisable.

For businesses, the risk is having to explain why some payments look unusual only after the bank asks. Transparent books, contracts behind larger payments and respect for cash payment limits prevent frozen accounts and lengthy investigations.