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#2267069 - 03/02/22 03:00 AM Purchase of MI's with Cash
Riece.F Offline
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Our BSA Program is undergoing significant changes and updates which are being led by a consultant. The consultant has mentioned that we should consider changing our procedures to no longer offer the option for customers to purchase MI's with cash in order to eliminate the need to keep track of log data. In order to get around this, the recommendation was to have the customers deposit the cash and then write a check or use a checking withdrawal slip to purchase the MI. In the past, we have collected log data even when the customer has done what is being recommended.

Has anyone implemented this at your institution? I feel like this would get a raised eyebrow from an examiner, however the cash being deposited would ultimately be monitored by our AML software.

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#2267071 - 03/02/22 12:08 PM Re: Purchase of MI's with Cash Riece.F
rlcarey Online
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I highly suggest finding a new consultant. That does not eliminate recordkeeping and has not done so since FinCEN issued this in November of 2002.

https://www.fincen.gov/sites/default/files/guidance/monetaryinstrumentsales3a.pdf
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#2267074 - 03/02/22 02:05 PM Re: Purchase of MI's with Cash Riece.F
ACBbank Offline
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Your AML software cannot identify this? Most have rules which can flag this type of activity. And of course, you should follow Randy's advice as it relates to your consultant.
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#2267081 - 03/02/22 03:15 PM Re: Purchase of MI's with Cash Riece.F
HappyGilmore Offline
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Pulling people out of the ditc...
Quote
I highly suggest finding a new consultant.

and ask for a full refund as well. sheesh...

let me guess, management was all agog at the wiseness of the consultant and the suggestion, right?
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#2267108 - 03/02/22 05:56 PM Re: Purchase of MI's with Cash Riece.F
RockChucker, CAMS Offline
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Agree with those above, this consultant is giving you bad information that can lead to serious headaches in the future.
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#2267127 - 03/02/22 08:21 PM Re: Purchase of MI's with Cash Riece.F
John Burnett Offline
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There was a very brief period of time before FinCEN issued the guidance Randy cited during which there was talk in the industry of how the recordkeeping rule could be avoided by following the advice this "consultant" is pushing. I'll be charitable and assume the consultant has been following that practice for a long time and isn't aware of the 2002 guidance. Then I will recommend terminated the consulting contract (and asking for a refund) based on this consultant's failure to keep current. That guidance is almost 20 years old!
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#2267152 - 03/03/22 04:20 PM Re: Purchase of MI's with Cash Riece.F
Local_Banker Offline
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Was there more to the recommendation? Was there a "part 2" where you would query your system to detect such cash deposits/check withdrawals and have them flow to a log automatically or through some other manual process? If not, then what everyone else says is on point!

I will note, the recommendation isn't necessarily a bad one overall, but it doesn't alleviate the need to maintain (or ability to generate on demand) a log.

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#2267172 - 03/03/22 10:51 PM Re: Purchase of MI's with Cash Riece.F
Curious in Kansas Offline
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I can share with you a recent experience with an independent auditor about this exact thing. Our policy has been that we don't sell negotiable instruments to non-customers and that remains the same. Our policy was also that the customer deposits cash into their account to purchase the negotiable instrument. Our independent auditor made the comment that even though we have that occur, it doesn't take away from the customer's intent (or spirit of the rules) so it doesn't matter if the customer deposits the cash into their account or if they purchase the item with cash. You still have to log that information.

Here's that information in the FFIEC BSA/AML Exam Manual.
https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirements/08

Indirect Currency Purchases of Monetary Instruments


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.

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#2267247 - 03/07/22 07:51 PM Re: Purchase of MI's with Cash Riece.F
NatalieJ BSA Offline
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I've been following this thread and searching online to try to find the answer regarding the following related scenario:

Customer deposits $13,000.00 cash into their account at 9am today, then returns at 2pm today to withdraw a $9,000.00 bank check. Prior to the $13,000.00 cash deposit, they had a balance of $600.00. My question is- when I complete the CTR, which selection should I make for item #25? Is it proper to use "a" for Deposits, or "d" for Purchase of negotiable instruments? FYI, our AML software identifies the reportable CASH IN transaction as a deposit.

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#2267250 - 03/07/22 08:11 PM Re: Purchase of MI's with Cash Riece.F
Sunshine Lady Offline
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I would use as cash deposit in because that was your original transaction.
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#2267256 - 03/07/22 08:44 PM Re: Purchase of MI's with Cash Riece.F
NatalieJ BSA Offline
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Thanks Sunshine Lady. That's what I ended up using.

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#2267262 - 03/07/22 09:17 PM Re: Purchase of MI's with Cash Riece.F
BrianC Offline
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Based on FinCEN CTR FAQ #30, I would record item #25 as $4,000 Deposit, $9,000 purchase of monetary instrument

Banks may implement a policy requiring customers who are deposit accountholders and who want to purchase monetary instruments with currency to first deposit the currency into their deposit accounts (while treating this two-step process as one transaction). Nothing within the BSA or its implementing regulations prohibits a bank from instituting such a policy. Therefore, if a customer purchases a monetary instrument using $15,000 in currency that the customer first deposits into the customer’s account, whether at the requirement of the bank or at the customer’s discretion, the financial institution would complete Part I of the FinCEN CTR with the customer’s information. In Part II Item 25, the financial institution would indicate $15,000 as cash in for Item 25d “Purchase of negotiable instrument(s)” as shown below. Completing the FinCEN CTR in this manner will notify law enforcement that the currency was used to purchase a negotiable instrument.
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#2267265 - 03/07/22 09:27 PM Re: Purchase of MI's with Cash BrianC
NatalieJ BSA Offline
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Thanks very much, Brian. I did consider doing it that way, but I wasn't sure of the customer's intention for the cash deposit.

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#2267312 - 03/08/22 08:04 PM Re: Purchase of MI's with Cash Riece.F
John Burnett Offline
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Theoretically, if a customer deposits $11,000 in cash on Monday and purchases a $9,000 cashier's check on Wednesday from those funds, it could be argued that the CTR for the cash-in would be broken down into $9,000 for the cash purchase of the cashier's checks and $2,000 for the deposit to the account. But many banks may have already filed a CTR (or created one for later filing) showing the entire $11,000 as a deposit.
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#2267316 - 03/08/22 08:37 PM Re: Purchase of MI's with Cash Riece.F
NatalieJ BSA Offline
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Thanks, John- I appreciate your wisdom, as always, and everyone here at BOL!

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#2270959 - 05/26/22 08:45 PM Re: Purchase of MI's with Cash Riece.F
Compliance NABW Offline
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What about depositing $7k in cash and then purchasing a $18k monetary instrument? Logically, the $7k in cash isn't what is purchasing the $18k cashier's check (for example). But, I don't really see this clearly explained in the Regulation or Manual.

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#2270965 - 05/26/22 10:32 PM Re: Purchase of MI's with Cash Riece.F
ColoradoAML Offline
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We record transactions like that on our log.

If the customer had $11k in the bank before the deposit, clearly that $7k was used for the purchase. If the customer had sufficient funds, then we're stuck trying to guess their intent. Rather than sit around and make guesses for a log that is rarely - if ever - reviewed by auditors or examiners, we just list it and move on.

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#2270966 - 05/26/22 10:33 PM Re: Purchase of MI's with Cash Riece.F
rlcarey Online
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You are talking about same day? That would trigger the MI recordkeeping requirements. On different days, then I would be looking to see if I could explain the source of the cash.
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#2270985 - 05/27/22 03:35 PM Re: Purchase of MI's with Cash ColoradoAML
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Originally Posted by ColoradoAML
We record transactions like that on our log.

If the customer had $11k in the bank before the deposit, clearly that $7k was used for the purchase. If the customer had sufficient funds, then we're stuck trying to guess their intent. Rather than sit around and make guesses for a log that is rarely - if ever - reviewed by auditors or examiners, we just list it and move on.

Yes, let's say they had $50k in the deposit account already. The $7k obviously isn't making a difference on purchasing the $18k check.

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#2270986 - 05/27/22 03:41 PM Re: Purchase of MI's with Cash rlcarey
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Originally Posted by rlcarey
You are talking about same day? That would trigger the MI recordkeeping requirements. On different days, then I would be looking to see if I could explain the source of the cash.

Yes, let's say it is done the same day. I don't see why it would trigger the MI recordkeeping requirements considering the customer could easily purchase the cashier's check whether the $7k was deposited or not. Let's say the customer had $200k in the account already and wanted a $45k bank check. What good does the $7k in cash really do as far as "moving the needle" to purchase the $45k check?

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#2270987 - 05/27/22 03:43 PM Re: Purchase of MI's with Cash Riece.F
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It's not the $7k in cash that is purchasing the check, it's the already existing deposit account funds.

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#2270988 - 05/27/22 03:52 PM Re: Purchase of MI's with Cash Riece.F
RockChucker, CAMS Offline
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The Country
While they could use the funds in the account to purchase the MI, why leave you self open to criticism? They are depositing cash and then purchasing the MI. Just list it and move on to more important things is my thought.
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#2270994 - 05/27/22 06:52 PM Re: Purchase of MI's with Cash Riece.F
ColoradoAML Offline
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Agree 100%. If an examiner does transaction testing, you'll need to justify your decision. Either you'll need to have procedures that you followed that require you to scrutinize the balance of each of these incidents, or document the decision individually, and you still may end up in an argument. No one will criticize you if you add it to the log.

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