Case Study III

Insufficient and unsatisfactory KYC documents Facts of the case: Maria is the Compliance Officer of the Best Audit Firm Ltd. She is in charge of meeting with all new prospective clients and obtaining all necessary information before the commencement of the business relationship. A new client, Mr. Shamir, introduced by a long-standing existing client, has come in the office for a meeting. Mr. Shamir is an Israeli resident, a Cyprus home owner with a company that trades in furniture. Maria went through all the KYC documents required for the onboarding, explained the companys policies and procedures to be followed and left the meeting with a promise that the prospective client will provide all documents within the end of the week, so the firm can proceed with its acceptance procedures. Mr. Shamir, as promised, dropped off at the reception an envelope with some documents, but upon review, Maria realized that he had only provided a few documents. She emailed him a list of missing documents and a new deadline to provide her with everything. Mr. Shamir responded that he was in a hurry to obtain a Tax Identification Number and requested the firm to proceed with the application to the Inland Revenue until he comes back next week with the necessary documents. The firm prepared the forms to be submitted to the Inland Revenue and asked him to come in the office and sign the forms and bring the remaining documents. Mr. Shamir signs the documents and leaves a substantial cash amount to the firm for future services but omits to bring in the pending documents required to complete the KYC and Due Diligence procedures. He explained that the documents are held by his lawyer and he has not passed by his office to collect them. Maria contacts the client who referred Mr. Shamir to the firm and finds out that he does not know him that well and that he arrived from the illegitimate airport of the occupied area of Cyprus. Maria contacts Mr. Shamir immediately and asks him for a meeting. Mr. Shamir fails again to provide the firm with the missing documents, he explained that he does not have a utility bill for his Cyprus residence which had been marked as his main residence and that his yellow slip (residence permit issued from the immigration office) is held by the lawyer. As a result, Maria informed him that Best Audit Firm Ltd cannot provide any services to him and returned the cash to him. No further services were provided to Mr. Shamir.

Answer the following questions:

1. What are the red flags which might indicate money laundering activity in this case?