We have a customer who owns several restaurants in our area. All are assumed names under a single corporation, so their transactions are aggregated, and often lead to CTR filings.

A little over six months ago, we found that this customer met all the criteria for a CTR exemption, and we were preparing to give them one. Literally, right before we exempted them, the owner brought $20,000 to the bank as asked the teller to complete 4 deposits of $5,000 each into the corporation account, so the money could not be "traced." (And yes, a CTR was still filed, because the guy was not a very good structurer)

A SAR was filed for structuring and we have continued to monitor the accounts in the time since we filed. All activity in the accounts before, and since, the day the structured deposits were made is exactly what you would expect for restaurants.

My question is this: does this single suspicious transaction prohibit me from exempting this customer from CTR filings? Because their activity before and since that transaction has been completely normal, I am leaning toward exempting them, with an explanation in their file of how and why I decided to do so, and on the provision that the customer does not engage in future suspicious activity.

Per FinCEN guidance that was issued 8/31/09 (FIN-2009-G003)

Question: Is a customer that has been the subject of a Suspicious Activity Report eligible for initial or continued exemption?

Answer: A Bank is required to file a SAR, where appropriate, regarding the activities of any of its exempt customers. However, if an exempt person is involved in a transaction that has been reported in a SAR, the bank is not required to cease treating the person as exempt. The decision to exempt, or to retain or revoke a customer's exemption, should be made by the bank in accordance with its risk-based anti-money laundering policies, procedures, and controls.

My personal feelings are that typically a SAR filing = a High Risk (HR) customer. We typically would not exempt a HR customer as they present a greater degree of risk and we would want to look at those transactions very closely.

Now it does have to be a risk based approach as AudtorK stated above. It is doable, but you could open yourself up to regulator criticism and you will need to be ready with a detailed explanation as to why you would want to keep them exempt if you know they intended to structure deposits in the past.

Just my .02

I have a slightly different scenario that I would like to share. We have an exempt customer and recently received a Grand Jury subpoena on the company. Some subpoenas indicate the statue that they are being investigated for and others do not. This subpoena did not. I called the contact on the subpoena (cannot recall if he was law enforcement or the prosecutor) to try to get a sense of what they are being investigated for to see if I missed anything in my monitoring of the account, but could not get the information. Further reviews of the activity have not revealed anything out of the ordinary so we continue to exempt the customer. Any feedback on this?

A subpoena is a little different story as we do not know what is really being looked at. If it is your risk based decision to take subpoenas or other judicial compulsion requests into account when granting or maintaining an exemption then I would follow those guidelines.

My personal thoughts are that if there is no evidence of wrongdoing going on in your review, you could note that in your review file for that customer. I would also adjust their monitoring schedule to include additional reviews at more frequent intervals than before. I would say that until something is made more clear from law enforcement or something turns up in your reviews, you could leave them exempt and be fine. Now a conservative approach would be to revoke the exemption as it is up to us as financial institutions as to who to exempt based on the qualifying criteria in the guidelines.

I would sure watch them close though for a while.