Customer A has a business account B. Keeps a balance in the business of about $200. Customer writes a check from business to herself each Friday for $2,000 and cashes it at a credit union. We reject it, don't pay it, collect our fee, account returns to normal balance. Not sure what goes on at the credit union but she has been doing this for over 5 years according to notes on the account.

Business Unit is happy to collect their fees, we haven't taken a loss because we reject it every time. I am not sure what the customer is doing exactly, but this is most certainly check fraud correct because the customer is writing a check they know will bounce?

Would it be the credit union's obligation to file a SAR for Check Fraud? Both of us? We are not a 314(b) participant to reach out to the credit union for details. I have only been a year but this goes back at least 4 years and a SAR has never been filed to this point.

Whether or not you take a loss or not is irrelevant to your SAR filing obligations. A SAR is based on transactions in excess of filing thresholds for transactions "performed or attempted" through a financial institution. If you conclude that this activity is suspicious (and I can't imagine how we'd arrive at the conclusion that it's not) then a SAR is required.

Business unit may be happy to collect their fees, but you will be filing a SAR every 120 days if this activity continues. At what point do we conclude that allowing this activity to continue through our institution is inappropriate?

Last word s/b "inappropriate," Brian?

I absolutely agree with you. It just came to my attention today. The loss is irrelevant, but I guess my question is, would it fall under check fraud? Businesses constantly go negative until merchant services credits hit but this is different. The owner is leveraging a credit union to cash one of our checks knowing it will be rejected. It's not kiting, just not sure where it would fall on a SAR to be honest. Fraud might be the only thing that makes sense.

while it may not be kiting, she is using the check to get a cash advance from the CU every friday for $2k. and if this is occurring every friday for 5 years, that is over $520,000. certainly falls under the auspices of fraud.

1) why are they still a customer?
2) why hasn't someone asked the customer what are they doing?
3) why has no one thought this was an issue and taken action?

Come on Happy - when you get a $30 OD every week for doing nothing - it is easy just to look the other way

praBSA -- I urge you to take the comments in this thread seriously. Your customer's actions are suspect and appear to be illegal. That your bank has escaped any loss is fortunate, yes, but it's irrelevant. The bank has a SAR filing responsibility here, and it should have filed (and kicked the customer to the curb) long ago.

Whenever I hear that from executive management or boards of directors, I pull out the 2014 FinCEN Culture of Compliance

https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2014-a007

Note bullet point #2 "Compliance Should Not Be Compromised By Revenue Interests"

I also encourage institutions to consider fee income First Delaware Bank received from rejected payments...until the FDIC and FinCEN fined them out of existence.

https://www.fincen.gov/news/news-re...oney-penalty-against-first-bank-delaware

you and your "common cents"...that 5 year revenue of $7800 is probably a game changer for the bank...

As for the CU, it has SAR filing obligations, too. You won't be able to know whether they have filed, but that, too, is irrelevant.

Back in my early days as a BSA officer (1980s) my bank failed to file on a check kite that resulted in a loss to another bank. That bank filed and our examiners learned about it. To say that I sat through a lecture on reporting (using a predecessor of the SAR) that year is putting it mildly. We started mandating internal timely notices of problem customer behavior soon thereafter.

Glad this fueled some good discussion. Filing decision was the easy part. Getting the front-line to exit the customer has always been the tough part for me. Both the branch manager and Retail Officer are on vacation. After 5 years I am shocked this woman hasn't been caught or reported for writing bad checks. It boggles my mind.

until the regulators find out about it and you systems did not catch it. The cost of consultants would be many times this amount.

Really really curious why the CU has kept her around. (I know that this is beyond the scope of the question, just that the same item bouncing after it being cashed, week after week, to me would be easier to catch than an item being returned. But it maybe an instance of it needing to be reported by people and not found by software.)

CUs can't just close an account the way banks can. They must convene all of their members and vote on whether or not to expel a member.

BrianC you are right, but the CU can limit the services they offer the member. We would have reduced her membership to a cash only savings account. No checks, period. That will usually take care of the problem. They will move on to another FI.

I'd really be interested in hearing what the CU has to say if called, just for a chat. I don't know where the breakdown would be but the customer may be profiting somewhere, somehow.

Old story. Guy at a construction site leaves every Friday with a wheelbarrow full of sand. Every Friday all this sand. The supervisor saw it and tried to figure out what he could be doing with all this sand. Eventually they figured out he was steeling wheelbarrows.

So, what is this customer really doing?