A slush fund may be considered a necessary evil in the business world, but inasmuch as payments out of those types of accounts are frequently illegal, MLROs and compliance officers who have the ability to identify and ferret out that activity can reduce the possibility of reputation damage, which may occur should media coverage of a slush funds payment scandal break, and the bank named in the press.

Some "red flags" that may indicate that a client is operating a slush fund amongst its legitimate accounts:

• Cheques payable to entities or individuals in businesses that are inconsistent with the aims and operations of the client.
• Payments made to international recipients, where the client is strictly a domestic entity in its operations.
• Cheques to persons or companies linked to government figures or their immediate families.
• Diversion of funds to the personal accounts of officers or employees.
• Payments to entities where there is no apparent service provided for these payments.
• Obtaining cash in large amounts, in an NGO or other type of of client that always is known to pay by cheque. 
• Unusual payment activity that suggests an attempt to hide the ultimate recipient of the funds (e.g. cashing several small cheques, "expenses" that have no factual basis, and cheques to officers that are endorsed to third parties).  

The account representative may be the individual most familiar with the client's typical account activities. Whilst it may appear to be a difficult task to identify such accounts, other clients in the same field are often the source of valuable intelligence about the internal workings of such businesses. Query them about suspicious activities of other customers, anonymously of course. They can help you with the puzzle pieces.