What does the term "Red Flags" refer to in bank compliance?

The term "Red Flags" in bank compliance specifically refers to indicators of potential identity theft or fraud. In the context of banking and financial institutions, these red flags are warning signs that suggest suspicious or risky behavior that could lead to fraudulent activities. They may include discrepancies in customer information, unusual transaction patterns, or behaviors that do not align with a customer's typical activity. Recognizing these red flags is crucial for banks as it helps in identifying and mitigating risks related to financial crimes such as money laundering or identity theft. By training employees to observe and report these signs, institutions can take proactive measures to protect their customers and ensure compliance with regulations aimed at preventing fraud.