Trade-based money laundering (TBML) is a method of disguising and moving illicit funds through the international trade system. Criminals often manipulate various aspects of trade transactions, such as pricing, quantity, documentation, and commodity type, to transfer value and obscure the source of funds. Some of the common red flags that may indicate TBML are:
* The transaction involves the use of front (or shell) companies: Front or shell companies are entities that have no physical presence, no employees, and no business activity, but are used to facilitate money laundering. They often have vague or generic names, are registered in secrecy jurisdictions, and have no available ownership information. In this case, ABC Holdings Ltd. and Sunrise Holdings Ltd. could be front or shell companies that are used to launder money through trade transactions.
* The type of commodity being shipped appears inconsistent with the exporter or importer's regular business activities: Criminals may use commodities that are unrelated to their core business or that have low correlation with the market price to launder money. They may also use commodities that are difficult to value, verify, or trace, such as precious metals, gems, art, or antiquities. In this case, the automotive parts company and the silk flower supplier seem to have no logical connection, and the value of the silk flowers may be inflated or deflated to transfer funds.
References:
* Trade-Based Money Laundering: Risk Indicators - Financial Action Task Force, pp. 9-10, 14-15
* Identifying TBML: 8 Trade-Based Money Laundering Red Flags - Alessa, pp. 1-2
* FFIEC BSA/AML Appendices - Appendix F - Money Laundering and Terrorist Financing Red Flags, p. 7
* AML Red Flags - What are the Top 10 Indicators? - ComplyAdvantage, p. 1

According to the ACAMS study guide, one of the red flags for money laundering in cash-intensive businesses is "the presence of privately-owned ATMs on the premises" (p. 222). This could indicate that the business is using the ATM to deposit or withdraw large amounts of cash from illicit sources, or to facilitate the movement of funds across borders. The other options are not necessarily indicative of money laundering risk, as they could be explained by legitimate factors such as the change in customer preferences, the economic situation, or the expansion of the business.
References:
ACAMS. (2020). Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.
CFI. (2023)Money Laundering - Overview, How It Works, Example 1. Retrieved from
https://corporatefinanceinstitute.com
CALERT. (2016)How Do Criminals Launder Money Through a Restaurant? 2. Retrieved from
https://calert.info

According to the third European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing1, Member States may allow the identity verification of the beneficiary under the policy to be carried out at or before the time of payout or before the beneficiary intends to exercise rights vested under the policy, provided that the following conditions are met:
* the beneficiary is identified as a natural or legal person or a legal arrangement, and the verification of the identity is not possible earlier, due to the nature of the product or the transaction;
* there is a low risk of money laundering or terrorist financing, taking into account the type of policy, the product features, the premium amount, and the distribution channel;
* the Member States adopt appropriate risk-sensitive measures to prevent the misuse of the policy during the life of the relationship.
This provision is intended to accommodate the specificities of the life insurance sector, where the beneficiary may not be known at the time of the conclusion of the contract, or may change during the life of the policy.
However, the Directive also requires that the identity verification of the beneficiary is carried out as soon as possible after the establishment of the business relationship, and that the insurance undertaking applies enhanced customer due diligence measures when the beneficiary is a politically exposed person.
References:
1: Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309,
25.11.2005, p. 15) 2