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#2264115 - 12/29/21 07:45 PM Indirect currency purchases of MI
chuckchuck Offline
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Joined: Apr 2018
Posts: 47
I was at a conference recently and they brought up a poing that got me reading the fincen guidance from June of this year when something changed.

If a deposit accountholder first deposits currency into their deposit account to purchase monetary instruments in amounts between $3,000 and $10,000, FinCEN guidance states that the
transaction is still subject to the recordkeeping requirements of 31 CFR 1010.415. 7 This requirement to maintain records on indirect currency purchases of monetary instruments applies whether the transaction is conducted in accordance with a bank’s established policy or at the request of the customer. Generally, when a bank sells monetary instruments to deposit accountholders, the bank already maintains most of the information required by 31 CFR 1010.415 because of BSA requirements to collect customer information.


Now my core doesn't do this, neither does my AML monitoring system. We are not changing either. I did manage to make a homegrown report to give me this information. How are banks monitoring this, storing and keeping it? Should we add it to our existing MIL log? Should we just keep it as ancillary reports and monitor as needed? Thanks,

https://www.ffiec.gov/press/PDF/Pur...Recordkeeping_Narrative_and_Exam_Pro.pdf

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#2264118 - 12/29/21 09:45 PM Re: Indirect currency purchases of MI chuckchuck
BrianC Online
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BrianC
Joined: Nov 2004
Posts: 6,694
Illinois
This isn't a new concept. FinCEN inttroduced the requirement to subject indirect monetary instrument sales to recordkeeping requirements in November 2002. The verbiage of the Exam Manual may have gotten a facelift, but the guidance below has bee around for almost two decades.

https://www.fincen.gov/resources/st...erpreting-financial-institution-policies

From an automated system perspective, see if you can prepare a query or report that identifies accounts that have monetary instrument purchases and cash deposits on the same business day. If this is not an option, make sure you are training tellers to identify monetary instrument purchases that are preceded by cash deposits.

To satisfy the recordkeeping requirement, you have to make sure that you have Name, address, tax ID, and birthdate for the purchaser along with the specifics of the monetary instrument. Whether you have a log for this or retain the information on a system report is up to you.

For suspicious activity montioring, if your automated solution does not generate alerts for monetary instrument pruchases, then you should have a manual process for reviewing individuals who make frequent purchases or multiple individuals who all make purchases payable to the same third party to identify suspicious activity trends, placement, funnelling, layering, etc.
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#2264161 - 12/30/21 08:19 PM Re: Indirect currency purchases of MI chuckchuck
banker1976 Offline
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Joined: Nov 2005
Posts: 346
Mid-Atlantic
We encounter this from time to time, front line staff depositing cash into an account and then processing a monetary instrument purchase. We will then remind staff of our procedure for these types of transactions. We also have back office staff who review a report of items from the previous day that were processed in the bank's official check account as a means to monitor for potential monetary purchases that were incorrectly bypassed. Again, we do encounter this from time to time, however it is not a regular recurring event as we continually disseminate with branch administration on this specific type of training to review with branch staff.
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#2264167 - 12/30/21 09:33 PM Re: Indirect currency purchases of MI chuckchuck
SmallBankBSA Offline
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Joined: May 2018
Posts: 232
Years ago I think it was common practice for banks to require the customer deposit the cash then withdraw funds to purchase the check. A "paper trail" is what I believe they would call it, at least from my past experience....I was a teller back in the 90's.

Regardless of having that policy or not, still does not exempt from retaining required information.

We too have a report that looks at all Monetary Instrument purchases to identify if a cash deposit was made prior to the purchase of the check. We are a small community bank so this is easily done, I'm not sure how a larger institution would handle that.
For monitoring purposes I review a Rolling three months work of purchases looking for anything suspicious. Our software does alert for this but it's just a double check that my regulators seem to like.

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