Question

A financial institution holds an account for a charitable organization whose stated mission is to promote literacy in the local community. The charity derives most of its financial backing from periodic fundraising drives that take in hundreds of small donations from individual donors. Recently, the institution conducted a due diligence investigation and noticed anomalous activity in the charity's account. Which of these is a red flag for potential terrorist financing?
a. the charity recently purchased a large insurance policy which does not have a surrender clause and cannot be used as collateral
b. the charity has no long-term leasing agreement on a physical property in a nearby town
c. the transaction history indicates a pattern of wire transfers to countries with no previous connection to the charity’s activities
d. the transaction history for the charity shows a large number of cash deposits
e. none of the above

Answer 1

Answer:

c. The transaction history indicates a pattern of wire transfers to countries with no previous connection to the charity's activities.

Explanation:

Any type of Non profit organization or charitable institute is the most risky institution for terrorist financing, hence the transactions which are being performed by the charitable organization to countries which were not previously included in the transfers list will raise a red flag for potential terrorist financing and strict due diligence will need to be performed of that organization because there may be the case that those wire transfers are helping the terrorist finance their cost through legal means i.e from a charitable and well known organization. And this is how all this terrorist financing works.

Hope this clear things up.

Good luck.