In 2020 the Foundation for Community Association Research discovered that community associations in the U.S. handle $96 billion dollars in assessments, and California communities alone manage more than $12 billion in association housing services (operations, physical asset management, reserves, capital improvements, conservation & environment). With so much money at play, associations need to be aware that they may be the target of money laundering.

Money laundering is the hiding of the origin of illegally obtained money, often finding a way to pay for something in an untraceable way, and/or getting a refund so the original genesis of the funds is hidden.

To combat this, making sure to know the source of funds being used to pay assessments and fines is very important. Also, a substantial overpayment happens followed by a request for refund, should be a red flag for you to look closer.

Some specific areas to be concerned about:
o ACA payments where the source is unknown
o Payments made in cash
o Customers who exhibit unusual concern for secrecy, especially as to personal identification, or a customer who delays in providing identification documents and information
o Foreign payments
o Third party cashier’s checks
o Traveler’s checks
o Anonymous prepaid credit cards and virtual currency
o Apparent alterations, inserts or odd markings on the face of the money order, traveler’s check, etc.
o A long delay (six weeks or more) between the issuance of a cashier’s check or money order and the date received.
o Any situation that appears to be an attempt to avoid tax reporting

Typically, a person making a suspicious transaction might try to hide or disguise the ownership, nature, source, location, or control of the funds. More difficult to detect, a transaction in the “layering” phase of money laundering might be one of a series of transactions that individually would not be concerning, but when viewed as a pattern of transactions, would raise suspicion.

No one wants to be the unwitting participant in a money-laundering scheme. Having financial protocols in place and an eye out for the red flags above can help you avoid just that.

Michael Berg, MBA, CIRMS, CMCA, EBP is the Owner and President of Berg Insurance Agency and may be reached at Michael@berginsurance.com.