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Suspicious Transaction: To file, or not to file?

What are your choices if you are faced with the possibility of a suspicious transaction taking place in your office? Consider the following scenario.

A young woman, not well known in the branch, came in one Monday morning and deposited $2500 in cash into her two month old checking account. On Tuesday she came in with another $2500 in cash to deposit. On Wednesday, the teller noticed her walking through the door and was not surprised to receive yet another $2500 cash deposit.

After the customer left, the teller mentioned the three transactions to the head teller, wondering out loud where the money was coming from. The head teller then discussed the transactions with the manager of the branch. All were suspicious that the girl might indeed be laundering money. They decided to keep an eye on the account.

Should they have taken action? Should they have reported these transactions and called the authorities? After all, even taken together, all the transactions did not exceed the $10,000 limit. If the customer continues to make these $2500 cash deposits, what should you do about it?

Under the new regulations, a plan of action is spelled out for you. In a situation like the one described above, the institution should:
Fill out the Currency Transaction Report (4789), checking off "suspicious transaction" on the first line.

Call the Internal Revenue Service, Criminal Investigation Division. (If you do not know the telephone number, call (800) BSA-CTRS)

Complete a Criminal Referral Short Form (Long Form if over $10,000) and forward to the proper authorities-including the Federal Bureau of Investigation and the U.S. Attorney. (Note: In order to do this, all the information needed for the 4789 should already be in file.)

But just suppose that the transactions were legitimate! You have now filed a form with the authorities that states you suspect your customer of being a criminal! If she finds out about the report, your account holder is not going to feel too kindly about that reference, and in our "suit-happy society," may decide to take legal action against you. You can, most assuredly, defend yourself. But at what expense?

On the other hand, suppose the customer IS laundering money and your suspicions were well founded. But the decision is made not to file the 4789, or make the telephone call, and certainly not to fill out the Criminal Referral Form. Subsequently, assume the young woman is prosecuted for money laundering, and, during the investigation, all the employees involved are asked if they were suspicious of the transactions taking place on the account. Now the defense your institution may have to mount may be because of action taken against you by the Internal Revenue Service or the Treasury Department through the United States Attorney.

Your choices seem apparent. Either you file, or you do not. But there may be a third choice open to you. The rule of "Know your customer" never was more important to your institution. Make it your highest priority to get to know this customer in order to determine the source of the cash.

If it is coming from a legitimate source, you certainly have a strong cross-selling area to cultivate. If it is not, the "customer" is going to surmise that you have discovered and identified what is taking place and will find some other institution to do business with. Either result is to your advantage. If it is impossible to find out the source of the cash, your next action may be simply to close the account after giving proper notice to the customer that you are doing so. Remember, you are not obliged to open or maintain an account with anyone. You have a right to choose your accounts.

This may be a situation where you need to exercise that right.

Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 1, 1/90

First published on 01/01/1990

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