Typology
Also called financial crime typology, ML/TF typology
A typology is a documented pattern describing how criminals launder money, finance terrorism or commit fraud. It sets out the methods, actors, products and warning signs involved. Regulators, financial intelligence units and FATF publish typologies so firms can design controls, monitoring scenarios and staff training around real criminal behaviour.
How it works
A financial crime team reads typology reports from FATF, its national financial intelligence unit and supervisors. It maps each typology to the firm's products and customers, then turns relevant ones into monitoring rules, risk factors and training cases. Examples include trade-based laundering through over-invoicing and money mule networks using newly opened accounts.
Typologies connect national risk to daily controls. UK firms must take account of information from their supervisor in their own risk assessment, and US banks are expected to reflect FinCEN's national priorities. A firm that ignores published typologies risks missing activity that regulators already expect it to detect.
The rules
Requires a written firm-wide risk assessment that takes account of information from its supervisor and of customer, country, product, transaction and channel risk factors.
UK relevant persons, including banks and payment firmsLists the most significant threats, including corruption, cybercrime, fraud and terrorist financing, for institutions to reflect in their programmes.
US financial institutions subject to the Bank Secrecy ActCommon questions
Where do typologies come from?
FATF, regional FATF-style bodies, financial intelligence units, supervisors and public-private partnerships publish them. They draw on suspicious activity reports, investigations and prosecutions, and are updated as criminal methods change.
What is the difference between a typology and a red flag?
A typology describes a whole laundering method from start to finish. A red flag is a single indicator, such as rapid movement of funds, that may point to one or more typologies.
How do typologies feed transaction monitoring?
Firms translate typologies into detection scenarios. A mule typology might become a rule that alerts on new accounts receiving many inbound payments and moving the funds out within hours.
