If a financial institution suspects money laundering activity, what should be the first action taken?

When a financial institution suspects money laundering activity, the first action taken should be to investigate the transactions and review related documents. This step is crucial for gathering initial evidence and understanding the nature of the suspected activity. Conducting an internal investigation allows the institution to assess the situation in detail, including analyzing transaction patterns, customer behavior, and any relevant documentation or records that may shed light on the issue.

This approach aligns with regulatory expectations, as financial institutions are required to have systems in place for monitoring and reporting suspicious activities. The findings from this investigation will guide further actions, whether that involves reporting the findings to law enforcement or taking other precautionary measures.

In cases where immediate notification to law enforcement is considered, that action typically follows a more thorough internal assessment to ensure that the information reported is well-founded and accurate. Stopping all customer transactions permanently would likely be disproportionate to the suspicion without a full understanding of the situation. Altering all operational procedures as a first action is unnecessary and could lead to confusion and operational disruptions without a concrete basis for such changes.