Here is the scenario: Customer "John Doe" opens individual account. Establishes normal banking pattern. Four months after account opening begins to deposit checks totalling approx. $40,000/month payable to "Smith Group". Subsequently writes checks to casinos for entire balance of account. Questioned Mr. Doe and he states "Smith Group" is his business that sells grain for a group of farmers to get a higher rate. I called the company that issues these checks (viable company) and they verified this and informed me they have had a business relationship with Mr. Doe for 10 years. Mr. Doe continues to deposit these checks (endorses them over to himself). In last month has gambled $45,000 away. I can't prove anything, but I have a suspicion this guy is bad news, why did he suddenly at the age of 60 start banking with us? Do I have a basis to file a SAR?

They're not called "Known Crime Reports", they're "Suspicious Activity Reports". (although I do like 'Something Ain't Right' very very much!)

What category are you going to mark on the SAR? Is it money laundering? Maybe. It's not any other violation I see on the SAR form.

I would resolve the greater issue here: Is he the sole owner of Smith Group? If he has not supplied you with any documentation on the Smith Group, I would request some. If he refuses, I would refuse to accept them for deposit. It's just too much risk ($) without docs to back it up. What if he is gambling away a partner's share of the company's profits?

If he is the sole owner, they are his funds to do with as he pleases. What's suspicious about that?

Another possibility: Does he have any ownership interest in the grain company...as in laundering money through that company into his personal account? If not, he's a gambler. Sin, vice...maybe. Criminal...not likely.

Just as in the other thread started by Wizard, you are a risk manager, and this is a risk management decision. Barbarian is correct, you do not have to determine if a crime has been committed, although if you did, it would add to the veracity of your filing decision.

"Something Ain't Right" is basically the facts you have gathered plus your gut instinct (and compliance people should never ignore their gut instinct). Of course, do not write that in your narrative LOL.

Whatever your decision, if this has been bumped up to the Review Committee, then you need support documentation for filing or for not filing. The examiners will want to see support documentation for either decision.

He has no ownership in the grain company - I checked that. He states the group is an informal group. Per the grain company (who told me more than I ever imagined they would) they report under his personal SSN.

I plan to take to risk review - just wanted another opinion first - thank you both

Use the Other option and document as "Unusual Account Activity". Law enforcement can review and decide if they want to pursue a formal investigation. You've raised the flag and your job is done (except, of course, for ongoing monitoring if you decide to keep the account).

There are several ways you can investigate further yourself if you should decide to do so (and I probably would). We would require the individual to maintain commercial account for his business deposits to facilitate monitoring by our system. This would prompt formal CDD and risk rating, including licensing, etc. if we felt there was need to do so. You could even ask for tax returns to substantiate account activity. Do you have fictitious name registration rules in your state? You get the idea.

I'll just add this for flavor; some of my colleagues at a retail bank in our area have a very specific point of view toward high velocity/high volume payments to casinos; they start to worry about the possibility of embezzlement where the account is a business account, or where the personal account customer also has access to a business account.

Absolutely. The possibility list goes on and on and the Bank gets caught smack in the middle of the customer's problem. And since we had knowledge of possible impropriety...guess who has the deep pocket?

Now that scares me. Everything others have stated here sounds appropriate. When you don't have an offense to mark and you use Other, I think it gets into that voluntary filing and that's where it's nice to have a committee decide whether to volunteer the information or not.

Smash,

"When you don't have an offense to mark and you use Other, I think it gets into that voluntary filing and that's where it's nice to have a committee decide whether to volunteer the information or not."

Don't be misled by the fact that there are only 21 boxes on the form (including other). The types of crimes committed against your bank or through your bank are only limited by the imagination of those committing the crimes. The boxes only reflect the most frequently reported crimes, not all possible crimes. Therefore, I would not consider the "other" box to be volunary reporting. I can give you an example. I think it is safe to say that almost all Medicare Fraud is committed through banks or other financial institutions, but there is no box for Medicare Fraud. If you detect Medicare Fraud being conducted through your bank, you have an obligation to report it.

How is Medicare fraud committed? Through checks? Then I would use check fraud as my primary and maybe use other to indicate Medicare fraud. When a person uses other alone, I see more voluntary than involuntary, because the crimes you are speaking of would fit into another category.

Medicare payments generally come via ACH. We generally check as many boxes as possible including money laundering and other.

How is Medicare fraud committed?

Medicare fraud is committed any way the perpetrators choose to commit it. It can be by cashing checks, making over the counter cash withdrawals, wire transfers, paying unlicensed "medical" workers, ACH, writing checks to other related or unrelated entities, etc. It really makes no difference. The point is that "other" is not an optional category. It is simply a place to put crimes that do not fit into a "block" designating a particular category.

Why in the world would you ever want to accept a check that is made payable to a business or organization for deposit into an individual account? Especially without having (at least initially) any idea whether he has any ownership interest? The whole thing carries the scent of potential embezzlement. Or perhaps even tax evasion on the part of the grain company, by keeping receipt of the checks off of their official books.

Regardless of what the true circumstances are with regard to this particular individual and the grain company, I would curtail the practice of accepting checks payable to entities for deposit to any accounts other than the ones that have been established for the named entity.