Which practice is a common vulnerability for investment and commodity advisers in money laundering schemes?

Which practice is a common vulnerability for investment and commodity advisers in money laundering schemes?

• A. Frequent additions to or withdrawals from accounts.
• B. Transfers from related accounts within the same family.
• C. Checks drawn on, or wire transfers from, accounts of third parties with no relation to the client.
• D. Clients who request custodial arrangements that allow anonymity.

Answer: (C)

Using funds from third parties is a common vulnerability because it makes it hard to verify the true source and ownership of the money. When checks are drawn on or wire transfers come from accounts that belong to someone else with no clear relationship to the client, the adviser cannot reliably connect the funds to the client’s stated activities or wealth. This obscurity is exactly what money launderers exploit to layer and integrate illicit proceeds into legitimate accounts. By accepting or processing such third‑party payments, an investment or commodity adviser increases the risk that funds are not legitimately sourced, and it weakens essential Know Your Customer and source-of-funds controls. Other patterns can raise red flags, but they don’t inherently demonstrate the same level of vulnerability. Frequent additions or withdrawals can be routine trading activity or liquidity needs. Transfers within family accounts may be legitimate, such as transfers for estate planning or funding. Anonymity through custodial arrangements is risky as well, but the specific mechanism that most directly conceals origin and ownership is third-party payments, which is why that option represents the best risk indicator in this context.

Using funds from third parties is a common vulnerability because it makes it hard to verify the true source and ownership of the money. When checks are drawn on or wire transfers come from accounts that belong to someone else with no clear relationship to the client, the adviser cannot reliably connect the funds to the client’s stated activities or wealth. This obscurity is exactly what money launderers exploit to layer and integrate illicit proceeds into legitimate accounts. By accepting or processing such third‑party payments, an investment or commodity adviser increases the risk that funds are not legitimately sourced, and it weakens essential Know Your Customer and source-of-funds controls.

Other patterns can raise red flags, but they don’t inherently demonstrate the same level of vulnerability. Frequent additions or withdrawals can be routine trading activity or liquidity needs. Transfers within family accounts may be legitimate, such as transfers for estate planning or funding. Anonymity through custodial arrangements is risky as well, but the specific mechanism that most directly conceals origin and ownership is third-party payments, which is why that option represents the best risk indicator in this context.