We have a recently opened small business checking account owned by a mother and daughter. The daughter lives here and is primary owner. The mother lives in another state and apparently runs the business from her home and Mail Boxes etc. All the deposits have come from one client also out of state and are sent to us by overnight mail or FED EX. The daughter owner apparently does not participate in the business and only withdraws cash or writes checks that are deposited to her personal account. The personal account is not a very good account.

We are apparently not the only account this business has. It appears that checks drawn on our account, payable to a slightly different version of our account name, are deposited in a bank in a third state and in two different banks in Mom's home state. In reviewing recent activity, it also appears that a check payable to an individual acting as sub-contractor was endorsed in the same handwriting as the mother’s and deposited in a bank in an additional state. Mom's handwriting is very unusual and the endorsement appears to be Mom's although it's a different name.

Since we are a small country bank without branches and not in a corner of the state, we do not commonly have transactions from a four state area nor do we have any other customers who pay $14.50 to overnight their deposits. There are several things that just do not feel right to me. Is this SAR material or am I being overly suspicious? Does this look like layering phase of money laundering?

Thank you for your help. I have learned so much from BOL. If you answer this query, I'll learn even more.

You have obviously already asked yourself the key question -- Is there a reasonable business purpose for this kind of activity? A lot of the outcome here depends on the volume of dollars involved, but I get the sense that it's a large number or your radar wouldn't be active.

This does look suspicious to me without knowing any more than you've said. Suggest you dig a little further to develop more transaction patterns, and if this fish still smells when you're done, put it in a SAR.

This sure sounds a little strange to me. Can you say what type of business it is, or what they are depositing? Are your funds always collected funds? It seems odd that Mom, who is operating a business from her home, would feel the need to have bank accounts in several different states. There may or may not be some structuring, kiting, or money laundering going on. I would file the SAR and let the authorities investigate it. It's better to file and CYA than to have your regulators ask why you did not file if you felt it was suspicious.

A few questions to begin with: 1) How did the mother sign the account agreement being out of state? 2) Did mother get ran through Chex Systems or Telechex? What were the results? 3) Have you been putting holds on any of these deposits?

My gut reaction is that you apparently have something "unusual" occurring. If someone brought me this account for review, I would start by asking the above questions. Because "KYC" helps you try to get the whole picture. I would wonder why mom needs the daughters account to begin with and yes these types of structured (layered) transactions would send up a red flag and I have seen the similarity in endorsements before.

Is there a lot of money changing hands? A lot of deposits and a lot of credits? I have seen this type of setup where it was a mother and son account where the mother ran a business (though locally) and she too was running a lot of checks through the account and it was interesting to review the account statement because you could see her business operations and his personal business as complete seperate transactions, yet in the same account. Long story short, we began to place holds on the account, monitored the activity and then eventually the IRS came a lookin' for her....this was before my time here and the bank did not file a SAR, but I might have.

Unless you are in the business of servicing out-of-state small businesses, which doesn't sound like you are, I would close this account. It sounds like a kiting scheme. It's the only reason to overnight deposits to an out of state bank. I would first place a hold on the next few deposits and at the same time send them a certified letter stating that you wish the end the account relationship.

I would be looking for a kiting scheme, but maybe it is just because I have seen so many lately. One of the things that makes me think that is the slight variation in the business name at the other bank. I have seen this before and found that the accounts had common owners. It would probably be a good idea to get someone else and sit down with copies of all of the checks that have been written and deposited to see if either of you can see a pattern or piece something together. Like I said, I am thinking kite, but I have seen so many of those recently that my judgement may be impaired!

It's funny that the deposits are overnighted as well. We had one kiter who used the US mail to send deposits to 20 different branches and each time the deposit would arrive exactly the same day that the corresponding check would clear! This guy did his homework! For all of his work, he would actually write the check number of the check he was covering on the memo line of the check from the other bank.

Either way, if the amount exceeds SAR reporting requirements, I would file. Keep in mind if you intend to keep this account, and the activity continues you will have to file follow up reports every 90 days to report additional suspicious activity.

Thank you all. The Mom came in with the daughter at almost closing to open the account and they were in a big hurry. It's a home interiors type business. I don't know if that means her box at Mail Boxes etc is tastefully done or what We have been Reg CC-ing the deposits because they are always well over $5,000.

Thank you all.

Unless you are making a ton of money on these customers (but it doesn't sounds like they really have a large balance)or a gain a comfort level fast, I would close it before it explodes.

If this is indeed a kite, and the other banks catch on and close their accounts before you- guess who's holding the bag on the (seemingly large) loss? I would not hesitate to close the account.

One other thing that makes this even more suspicious is the Mailboxes, Ect. address. I have always been told that mail drop type addresses on new accounts are a real red flag. Do you also have a physical address on the business? This situation is like an onion, the more layers you peel the more it seems to stink!