In addition to other red flags, we have identified the following specific red flags relevant to our business and industry:
- Client suddenly repays a problem loan unexpectedly.
- Client makes a large, unexpected loan payment with unknown source of funds, or a source of funds that does not match what you know about the client.
- Client repays a long term loan, such as a mortgage, within a relatively short time period.
- Source of down payment is inconsistent with borrower’s background and income.
- Down payment appears to be from an unrelated third party.
- Down payment uses a series of money orders or bank drafts from different financial institutions.
- Client shows income from “foreign sources” on loan application without providing further details.
- Client’s employment documentation lacks important details that would make it difficult for you to contact or locate the employer.
- Client’s documentation to ascertain identification, support income or verify employment is provided by an intermediary who has no apparent reason to be involved.
- Client has loans with offshore institutions or companies that are outside the ordinary course of business of the client.
- Client offers you large dollar deposits or some other form of incentive in return for favourable treatment of loan request.
- Client asks to borrow against assets held by another financial institution or a third party, when the origin of the assets is not known.
- The loan transaction does not make economic sense (for example, the client has significant assets, and there does not appear to be a sound business reason for the transaction).
- Client seems unconcerned with terms of credit or costs associated with completion of a loan transaction.
- Client applies for loans on the strength of a financial statement reflecting major investments in or income from businesses incorporated in countries known for highly secretive banking and corporate law and the application is outside the ordinary course of business for the client.
- Down payment or other loan payments are made by a party who is not a relative of the client.
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