We're a community bank with many branches and spread out over a region. We've been discussing the role of our Branch Managers / Officers when we have customers that appear to be structuring or have other activity on their accounts that we're not comfortable with. We'd like to poll other banks and see how these situations are handled. Does your Account Officer talk with the customer first and provide the brochure about the illegality of their activity? Does the Security Department get involved initially or only if the activity continues? Do you give your customer a second chance if it appears that although they knew "something" about the $10,000 threshold, they may not know structuring is illegal? In other words, do you give your customers a warning before closing their account? We'd just like to be sure that our procedures are consistent with our peers. Thanks for your input!

We do not provide any warning to the customer. If we suspect structuring, we file a SAR. We do not close accounts for structuring alone, even ongoing cases.

Make sure one of the FinCEN structuring brochures land in thier laps somehow.............

It's up to them to know the law. If someone wants to give them a brochure, that's fine, but I feel no obligation to give them one. I say, just file the SAR.

On structuring cases, we have the customers Relationship Manager have a discussion with them on how a CTR works and to let them know that attempts to avoid CTR reporting are illegal. We also provide the FinCEN "Facts you Should Know" brochure.

We have a Committee process in place that looks at repeat filings. We do attempt to stop the illegal activity (and structuring is) so that we are not a participant in allowing that known illegal activity to continue. We have a version of 3 strikes. If we file 3 SARs on a given customer, it is likely that they will be closed out as they continue to engage in illegal activity, and we do not want to be a party to that activity by not closing the account.

Anyone (customer) can make a mistake and not understand how CTRs work. Most think it will trigger an IRS audit and others just do not want Big Brother in their business. Sometimes it is a one time occurrence and we may note it as such, give the customer a borchure, and then monitor them closely for any additional activity. Now if the amount is flagrant (say $9,900 or something) we will file even on a one time occurrence as the intent is clear to avoid the CTR reporting.

But anyway, I would hand out the brochure, file the SAR and monitor the account. If they continue to structure and you continue to file SARs, I would be ready to explain to regulators why the account remains open (if you do not have a defined policy on when SAR filings = account closure). We take the more conservative approach of a three strikes kind of rule like I mentioned. And it is communicated to Senior Management as necessary to ensure their full support on those account closure cases.

Hope that helps.

"If we file 3 SARs on a given customer, it is likely that they will be closed out as they continue to engage in illegal activity, and we do not want to be a party to that activity by not closing the account"

This is a very misplaced concern. As long as the bank is not at risk, there is no requirement to close these accounts - you just have to make the internal decision on whehter the account relationship is worth the time for SAR filing. I have never seen the regulators criticize a bank for this and I have banks that have continued to file on customers for years. The exam manual indicates: " Ultimately, the decision to maintain or close an account should be made by a bank in accordance with its own standards and guidelines.". However, you should have a formal review process.

"Anyone (customer) can make a mistake and not understand how CTRs work. Most think it will trigger an IRS audit and others just do not want Big Brother in their business. Sometimes it is a one time occurrence and we may note it as such, give the customer a borchure, and then monitor them closely for any additional activity."

Ignorance of the law is no excuse. If they structure even one transaction you have to file a SAR, regardless of the remediation events you might undertake with the customer.

Education of customers is tricky and I would suggest not discussing much with them beside just handing them the brochure. If they move thier relationship and start structuring and eventually get caught, the last thing you want them to tell law enforcement is that several years ago an employee at XYZ Bank came and talked to me about structuring and basically through the conversation, trained me on how to avoid reporting.

For what it is worth.

2. Questioning Individuals about Potentially
Suspicious Activity

When determining whether suspicious activity has occurred, institutions are responsible for “examining all the facts, including the background and possible purpose of the transaction.”21 As part of an institution’s due diligence to determine whether suspicious activity has occurred, reasonable investigation into the nature and purpose of the activity may be necessary.

Institutions have expressed concern over the perceived tension between questioning a customer about potentially suspicious activity and the institution’s responsibility to maintain the confidentiality of SARs.22 FinCEN recognizes that under certain circumstances, institutions may discreetly question a customer about the nature and purpose of a transaction without revealing their intention to file a SAR. For example, to determine whether a customer’s transactions are “designed to evade any [reporting] requirements,”23 an institution may wish to ask a customer why he or she is making frequent cash deposits slightly below a certain reporting or recordkeeping threshold. If the customer provides an answer that reasonably satisfies the institution that the transaction is not designed to evade reporting requirements (e.g. her business has a verifiable insurance policy that covers up to $10,000 in currency in the event of a burglary), no SAR would be required. Financial institutions are encouraged to document SAR decisions, including final decisions not to file a SAR. (See Item 5 for additional guidance on documentation of SAR decisions).

Institutions are reminded that any questioning should not risk “tipping off” the customer or otherwise disclose that a SAR is being filed. Ultimately, institutions will need to exercise discretion and judgment when determining how and when to inquire of customers about unusual activity.

Damon, your process most closely resembles ours.

Randy, we were criticized during our last exam regarding repeat SAR filings. A Sr. Examiner at the Fed put it this way: "Structuring is illegal. Why would you want a customer in your bank doing illegal activity?" They further advised that repeat SAR filings should be examined to determine (a) that the activity is indeed not suspicious and no add'l reports need to be filed, or (2) the account should be closed.

We hate to close any customer's account, especially if they're not aware. We want the account officer to talk with the customer first and then if the activity continues, then we look to closure. In most cases, that one conversation with the Account Officer is all it takes to get the message across.

Thanks again for everyone's input!

Nu2BSA,

Per Retread's post, the regulators accept the fact that your bank may "consult" with the customer over suspicious activity including structuring. We've discussed consulting here many times including in this prior thread that links to two previous threads.

The Examination Manual sets out some fairly specific recommendations on repetitive filings in addition to the statement quoted by rlcarey:

The bank should develop policies, procedures, and processes indicating when to escalate issues or problems identified as the result of repeat SAR filings on accounts. The procedures should include:
• Review by senior management and legal staff (e.g., BSA compliance officer or SAR committee).
• Criteria for when analysis of the overall customer relationship is necessary.
• Criteria for whether and, if so, when to close the account.
• Criteria for when to notify law enforcement, if applicable.

Damnon's process sounds as if it is based on that guidance.

From the podium, I've heard representatives from each of the four federal functional regulatory agencies for banks say they would never tell a bank to close a customer's account. However, from the field, bankers have told me that examiners have told them an account should be closed, but not one ever mentioned it in the written report of examination.

So, closing the account is an option, not a requirement. (If the relationship was not profitable to begin with, it would be my first option.) Repetitive SAR filing for structuring is expensive and time consuming and I would consider it only if the account was profitable enough to offset the expense. However, in all liklihood I would get annoyed about the situation and send a compliance person, not a glad hander, to hand deliver the FinCEN brochure and have a talk with him.

I do not feel the concern is misplaced, but we obviously disagree. I was providing input to the question. Every program is different.

And yes, Ken, we did base a lot of our program off of that guidance. I have also seen examiners questions why accounts remain open if you have multiple SAR filings. And as Ken said, it often is just a "discussion" item, but it is on their radars when they see repeat filings. I do know law enforcement prefers banks to keep accounts open so they can continue to have a detailed papaer trail. We also add a paragraph/sentence in the third SAR filing (or sooner depending n the violation) as to our intentions on closing the account due to the repeated activity.

We hate to loose accounts as I am sure most of us are (good accounts for sure) but we also have a defined process in place for those bad seeds as it were.

For the record, we are also very careful in what is disclosed to the customer to avoid tipping the hat as it were. We take that very seriously. The discussions are always done holding SAR reporting confidentiality in the highest regard.

One reason to provide the CTR pamphlet from FinCEN is to be able later to show the customer knew about the law (including the info in the pamphlet about structuring being illegal). Knowledge of the prohibition is one leg of a conviction.

We do like to give our customer's the benefit of the doubt, but let's face it, if they structure over a period of months and years, they KNOW what they're doing. Most of the accounts that are profitable enough to keep also have enough sense to read the writing on the wall when an account officer talks with them. The ones that just don't get it never will and for the most part, are not profitable. Of course, we don't want to run the reputational risk of being known to close customer accounts at will. I thought it interesting that an IRS agent told me he had visited with the suspect in one of our reports and he had him sign a "Notification of Law" to be sure that the customer was aware. A little extreme for a Bank to do, but wouldn't it make a point with a customer!

For what its worth, I would advise anyone to be very careful with a "three strikes" approach to educating a customer about structuring. I think its fine to help your customer understand CTR requirements -- that's public information -- but I would strongly suggest you file a SAR for strike one, strike two, and strike three if you suspect structuring.

Keep in mind that maintaining a relationship for a customer that continues to structure may ultimately result in your bank receiving a subpoena. At a previous bank, we spent a huge amount of money producing the documentation asked for in a subpoena. We had to hire a temp that worked exclusively on the project and the documents filled five banker boxes. He had several accounts and they wanted to see activity on all of them. The guy ended up going to jail a few years later for tax evasion. That incident changed our minds about keeping accounts open. IMHO, it's just not worth it to maintain the relationships.

I'm all for educating the customer about our reporting requirements. Many small business owners have received bad information from friends and their CPAs. Many do not realize that structuring is a crime. If they continue to structure after being given the brochure, then it's a different story!