First-time BSA examiner at our financial institution is dropping this in our laps at the end of the exam:

If a customer purchases a large cashier's check (say, $20,000) and doesn't ever cash it, that's suspicious. Where's your SAR? What is the "purpose" of storing money in a monetary instrument, rather than depositing them into an account?

Customer purchased an $8900 check 5 years ago, came in last month and turned it into $1,500 cash, and a $500 check to IRS, and a new cashier's check for $6900. This is "check churning." Where's your SAR?

Customer made a deposit 2 years ago, containing a cashier's check for $150,000. That cashier's check was 8 months old when it was deposited. What was the business or apparent lawful purpose for "storing the money" in a monetary instrument? Where's your SAR?

Customer closed out her $75,000 CD a year ago and never cashed the check. Why is the check still outstanding? Where's your SAR?



At this point, they are talking citing the bank for failures in training, internal controls, and failure to file reports. You know where that leads.

How would you reply?

How is that any different than storing money under your mattress? We have some bank employees that do that. If you ask them why they do it, they say that is how they save money. If they don't see it in their account, they won't spend it. I think that's a horrible way to save money, but that is what it takes for some people.

I would see how it plays out in the exit meeting and then have a conversation with the EIC.

...or intentionally over-withholding income taxes.

'First time BSA examiner' says it all.
Ask them to show you where in the Act it states that holding on to a monetary instrument is a SARable offense.
Quite the contrary.
Holding a check for years keeps the funds OUT of money laundering...and all other cash flows too.

Anyone remember "malicious compliance"?

OP here: EIC is the one making this assertion. Exit is done now. Intention is to cite us for failure to file SARs and other failings.

Time to call the ombudsman and kick this to Washington.

I concur with Carey...

I agree with taking it up a level or two, but wait until you get the exam report. Maybe a seasoned review examiner will have the same reaction we did...and strike the comment from the final report.

If one regional office insists on citing this as a SAR violation, every bank in the country is suddenly blindsided with a backdoor new regulation. Since SAR omissions in certain circumstances can be viewed as aiding and abetting money laundering, this could expose banks to significant penalties. Matters of this significance should be handled in Washington, not at regional offices.

I've seen this before, holding money in Official Checks. It always leads to a BSA discussion and the majority of the time the client is hiding money from someone (Spouse, IRS, courts, etc.). Whether that triggers a SAR would be unique to the individual circumstances.

If these are the only instances leading to potential BSA violations, then you need to escalate this quickly. Once you get into the BSA hole it's extremely difficult to get out. If it's this, plus other issues, that's a different story.

Yeah, I wouldn't be waiting for a report, but would be contacting the ombudsman or supervisor at this point.

along with Jay, I would be reaching out well before getting the final...

I'm getting in at the end of this, and it's been years since I was involved with BSA, but was the intent of BSA to trace cash?

If the checks were obtained with debits or checks, where is the money hiding? I've glanced over the exam procedures, and other than purchase of negotiable items, I couldn't find too much on what the violation might be for.

Thanks

The idea is that holding a physical Official Check (A thing of value) is a good way to hide money as the funds are not in a bank account. It's a horrible way to launder money, but could be used to hide money from various parties. Whether a not a SAR is required would be based on the result of the investigation itself, not simply the fact that a client is holding a cashier's check.

Placement Stage no


Layering Stage no


Integration Stage nope

you can always ask which stage of ml is it.

You must be in the southeast. We have been seeing a few examiners that do the same thing, and the box checked on the SAR is "Transaction with no apparent economic, business, or lawful purpose". Churning or nibbling, this is where it goes.

Sort of a catch-all.

I don't agree with it, but it's not my battle to fight. Hope this trend gets reversed.

SMQ or OP - Which agency?

FDIC