Why does fiat currency remittance encounter bank scrutiny?

Fiat money transfers are often subject to bank scrutiny because banks and Financial Institutions must comply with various regulations and compliance requirements, primarily to prevent money laundering, terrorist financing, and other illegal activities.

The following are common reasons for bank review:

1.Anti Money Laundering (AML) regulations: Banks will check the source, amount, and counterparty of remittances to ensure that funds are not used for money laundering activities. Large remittances or funds from unknown sources are more likely to trigger scrutiny.

2.Know Your Customer (KYC) Procedure: Banks need to confirm the identity of customers and understand their transaction background. This includes verifying the identity information of the sender and recipient, especially for new or unusual transactions.

3.Large remittances or frequent transactions: Remittances exceeding a certain amount may trigger the bank’s automatic review system, especially for cross-border remittances. Accounts that frequently conduct large transactions will also be monitored.

4.Suspicious transaction behavior: If the remittance activity does not match the account history or the customer’s financial background, the bank may conduct additional scrutiny of such transactions.

5.Sanctions and blocklisted countries: If the remittance involves a sanctioned country or individual, the bank will block or further investigate in accordance with international regulations (such as the OFAC sanctions list).

6.Unknown source of funds: Banks may require remitters to provide proof of the legal source of funds, especially when the amount of funds is large.

7.Intermediary banks or cross-border transactions: Cross-border remittances may involve multiple banks, and the intermediary bank’s review process may also cause delays or request additional information.

These review measures are to ensure the security of the banking system and compliance with international and domestic laws and regulations.