Suspicious Activity Question

Posted By: Comply Central

Suspicious Activity Question - 06/16/21 02:44 PM

I am new to BSA and wondered if you could help me determine if this scenario is suspicious and if so what type of suspicious activity would you consider it? If a customer only cashes what looks to be checks from a contractor, which averages about $20,000 a month, and never deposits the funds, just keeping enough in the account to keep it open, would this be considered suspicious activity from a BSA standpoint? I think he is only keeping an account with us so we will cash his checks.
Posted By: rlcarey

Re: Suspicious Activity Question - 06/16/21 02:54 PM

That is a lot of cash without knowing more information about the customer. I would just file and close his account.
Posted By: lokes

Re: Suspicious Activity Question - 06/16/21 03:21 PM

I would consider some additional information like: 1. Are these checks from contractors a result of work he is doing? 2. If so, is this in line with what he states his employment is? 3. Does he question or avoid filing CTRs when he is cashing the check? 4. Does he travel to different branches to cash the checks? 5. Is there something about the activity that might give you a feeling he is laudering money or obtained the funds through illegal means? How long has the activity been going on and how long has he had an established account with you? Like you said, he might just be using your financial institution to cash the check so he has quicker access to funds (avoiding check holds). Is he cashing the check to pay employees in cash? I know this doesnt really give you an answer, but just trying to stimulate things to consider. It might not even hurt to give him a call and discuss the activity; a lot of times you get good information that way that will help steer what direction you decide to go with it. Good luck!
Posted By: Comply Central

Re: Suspicious Activity Question - 06/16/21 03:55 PM

1. He is a builder.
2. It is consistent with his line of work. The construction businesses are so busy in our area.
3. He does not question or try to avoid CTRs. Almost all check cashing totals are over the limit.
4. He always goes to the same branch and most of the time same teller.
5. I don't think there is any type of laundering going on. It just looks like he does a lot of work for one individual contractor. Usually referencing what lot or address the work is for.
He has had an account for a few years, but the increase in the cashed checks started around the fall of last year. Of course like I mentioned construction and housing has been crazy in our area and materials are much higher now. He mentioned that it is for materials and his pay to the teller one time as well. I had the teller make him start depositing the checks, he does then withdrawals most of it. I thought maybe he is paying some people who work for him in cash, but from my understanding that is legal to do so. It would be on the employees to report their earnings themselves. Like I mentioned I feel like he is just keeping an account with us to cash his checks.
Posted By: rlcarey

Re: Suspicious Activity Question - 06/16/21 04:03 PM

Then as I suggested - make your decision on this SAR and then remove any doubt about what you need to do in the future as unless you charge service fees for dispensing cash - he is a money losing customer.
Posted By: ACBbank

Re: Suspicious Activity Question - 06/16/21 04:19 PM

So he is a builder. He could easily provide documentation supporting the cash activity. How do you know this customer isn't avoiding payroll taxes? You stated that it's the employees are responsible for reporting their cash income? How do you know that? Are they contractors?

Maybe you have answers but I hope your answers aren't based on responses from the customer without some type of verification. I don't know many legitimate contractors who don't have business accounts. This doesn't make sense to me.
Posted By: Comply Central

Re: Suspicious Activity Question - 06/16/21 04:27 PM

Thank you for your help.
Posted By: Amy S

Re: Suspicious Activity Question - 06/16/21 04:34 PM

You aren't his accountant as far as taxes and paying employees go, but, if he is purchasing materials and he is on the up and up, he would be paying with checks/debit to create a paper trail for his bookkeeping, not suddenly cash. If this is not how he has done business in the past, it wouldn't change just because he is busy. Sounds suspicious to me, especially with it being checks from one specific source. When in doubt on a SAR, follow your instincts.
Posted By: Comply Central

Re: Suspicious Activity Question - 06/16/21 04:47 PM

Thank you for your help.
Posted By: CI@MBOC

Re: Suspicious Activity Question - 06/17/21 07:21 PM

OP - you could pose this scenario to a hundred different AML/BSA investigators, and you'd get a hundred different responses, opinions, thoughts, inquiries, follow-up questions.

"I think he is only keeping an account with us so we will cash his checks." If you charge a check-cashing fee, darn right he is. That's not a BSA issue.

Been to home depot lately to see the prices on a single sheet of plywood? No joke, raw materials for construction/contractor/handyman/craftsman jobs are crazy.

Always have to keep the perspective of while $20000 cash might be a lot to you and me, maybe it's entirely normal for them. Construction trade suppliers also offer cash pricing discount as opposed to plastic (just like gas stations). If he's not structuring, then I don't see any AML issue with what you've posted. Sounds like his checks cashed are right in line with what he stated his employment/occupation is.
His taxes are not your issue as AML/BSA investigator. That is most certainly not the purpose nor intent of a SAR.
Posted By: edAudit

Re: Suspicious Activity Question - 06/18/21 01:28 PM

$20,000 a month is $240,000 per year. Make your decision and if you do not file document document and document.

As for Home Depot and cash; there are incentives to using credit such as 1 year for returns, financing options and using self service registers (have you ever waited on the manned register while the self serve is open at HD.. Try putting $20,000 in cash into one of these.

While banks are not accounts or tax advisors, BSA risk can also add Reputational risk and Regulatory risk.

This is not a file or not to file post as there does not appear to be enough info. Did someone talk to the client and get a reasonable explanation?
Posted By: praBSA

Re: Suspicious Activity Question - 06/18/21 02:24 PM

Originally Posted by edAudit
As for Home Depot and cash; there are incentives to using credit such as 1 year for returns, financing options and using self service registers (have you ever waited on the manned register while the self serve is open at HD.. Try putting $20,000 in cash into one of these.

To be fair, this doesn't really happen in practice. I worked construction for a year after law school before getting into compliance. Every contractor has an "account" with HD/Lowes - they never cash out, they order their stuff, pick it up, and are billed for it. So, spending cash there is actually odd to me. We have lumber yards, stone quarries, etc. here that deal almost exclusively in cash and give discounts for cash purchases, that seems much more likely to me. Sorry to sound argumentative, I don't mean too. You're right, we are not accountants or tax advisors, that's all his problem.

Here nor there, I don't think it's a lot of money in the industry, but you know your customer better than the rest of us. Get an explanation, if you believe him, document and no file. If you don't believe him, report it.
Posted By: edAudit

Re: Suspicious Activity Question - 06/18/21 02:46 PM

These checks should be payable to an individual and not a business. Is there a business? In my neck of the woods (may not be relevant in you location) all construction companies need to have a business license and insurance. If so why are the checks payable to an individual?

Sorry there is not enough information to make a decision. Someone needs to talk with the customer and have knowledge of the industry in your location. What is common in NYC may not be common in a small town.
Posted By: CI@MBOC

Re: Suspicious Activity Question - 06/18/21 04:37 PM

I completely disagree with communicating with the customer.
That is a slippery slope that defeats the point of having skilled, experienced, investigators. Might as well just call every single customer every single time you have an alert/investigation, then no one would ever have to file a SAR ever again. Impenetrable risk management!
I'm sure an auditor/regulator would love to read how that process is designed and implemented.
Posted By: rlcarey

Re: Suspicious Activity Question - 06/18/21 05:04 PM

Well, you either need to figure out what the customer is doing and be comfortable with it or get rid of them. I am at a loss about taking a stance as to not to talk to a customer in order to get comfortable with their business operations. AML/BSA does not pay the bills and just willy nilly cutting customer's loose because you do not want to talk to them is usually not the way to go.
Posted By: ColoradoAML

Re: Suspicious Activity Question - 06/18/21 05:50 PM

In my opinion, asking a customer what they do for a living, the purpose of certain transactions or why there's a change in activity is completely appropriate in many cases. I'm sure I'm not alone in having an investigation team that is certain that activity is suspicious, only to have a relationship manager inquire with a customer and return a completely reasonable explanation and supporting documentation. Without asking, we'd be inundating law enforcement with useless SARs. I also think there's plenty of activity we can view and conclude that regardless of the customer's explanation, a SAR is/is not warranted.

I don't believe that any bank investigation team has the tools to intuit the purpose behind all transactions while sitting in an office looking at account statements. If it were possible, what would be the purpose of CDD/EDD questionnaires?
Posted By: CI@MBOC

Re: Suspicious Activity Question - 06/18/21 05:58 PM

What's there to get comfortable with? He's a builder/contractor cashing checks from construction co's.
Posted By: edAudit

Re: Suspicious Activity Question - 06/18/21 06:31 PM

If he is a builder why is he getting checks to cash payable (presumably) to a individual and not a business? Why is the checks not being deposited to a business account and then needed cash withdrawn?

Most banks will not cash a check payable to a business for a good reason.

Once again to determine if it is suspicious I would need additional information. There is enough information provided to institute an investigation.

If we tossed all customers that show up on an alert we will quickly be out of business.
Posted By: rlcarey

Re: Suspicious Activity Question - 06/18/21 06:41 PM

Originally Posted by CI@MBOC
What's there to get comfortable with? He's a builder/contractor cashing checks from construction co's.

No chance of money laundering there I suppose?
Posted By: HappyGilmore

Re: Suspicious Activity Question - 06/18/21 08:51 PM

Originally Posted by CI@MBOC
What's there to get comfortable with? He's a builder/contractor cashing checks from construction co's.
so he says, but without having a conversation and getting more info about why he is getting checks like this and cashing, then yuo don't know. I'd hate to be the bank exec getting subpoena'd and going in front of the judge saying "talking to a customer is a slippery slope and not my job..."
Posted By: CI@MBOC

Re: Suspicious Activity Question - 06/18/21 10:48 PM

Originally Posted by HappyGilmore
so he says, but without having a conversation and getting more info about why he is getting checks like this and cashing, then yuo don't know.
He's getting checks like that because he's a builder/contractor/handyman/craftsman/carpenter. That's what he stated when he opened his account. What sort of checks would you expect him to be getting if not from a builder/contractor? I'd be more suspicious if the checks were from a liquor store or used car dealership or pants manufacturer, no?
There's no requirement he has to have a business account unless the checks are payable to a business.
Is your plan to call every customer who generates an alert/investigation because "you don't know"? Every alert/investigation I work I don't actually "know" what's happening, I can only assume. I know nothing of my customer's personal lives or business transactions/contracts/jobs/projects, I just ask myself if the activity makes sense for the customer profile. Maybe he does crown molding from exotic woods and not MDF? Maybe he installs travertine and Italian tile not just porcelain? Maybe he takes his career seriously like Mike Holmes and isn't some Craigslist hack? Maybe he does specialty carpentry work on handrails, kitchen cabinets, and entertainment centers and not just stairs? Maybe he plumbs, using only copper piping and no PVC?
I get your point, I do. But you're trying to find absolution rather than reasonableness.

Originally Posted by edAudit
If we tossed all customers that show up on an alert we will quickly be out of business.
Agreed. Exiting a customer for AML/BSA is fantastically subjective and puts all sorts of awkward between the customer and the branch employees. We don't only keep customers we make money from. Never in my career have I ever heard someone say we should exit a relationship because they're "a money losing customer".
Posted By: rlcarey

Re: Suspicious Activity Question - 06/19/21 12:15 PM

You are missing the point. I have been at this for 40 years now and a contractor cashing a quarter million dollars worth of these checks a year is not normal behavior, regardless of who is paying him. There basically is no "normal" excuse for such activity when the only banking relationship is a checking account that he does not use except to get in the bank door that allows this activity to continue without question (until now)..
Posted By: edAudit

Re: Suspicious Activity Question - 06/19/21 01:05 PM

Maybe he does crown molding from exotic woods and not MDF? Maybe he installs travertine and Italian tile not just porcelain? Maybe he takes his career seriously like Mike Holmes and isn't some Craigslist hack? Maybe he does specialty carpentry work on handrails, kitchen cabinets, and entertainment centers and not just stairs? Maybe he plumbs, using only copper piping and no PVC?

Maybe he launders money for a cartel, Maybe he is involved with human trafficking, Maybe tax evasion …

Who knows unless you find out. On the surface is does not seem normal

(sorry Randy I only have 39 years of this) lol
Posted By: Andy_Z

Re: Suspicious Activity Question - 06/19/21 03:42 PM

I'll add to the thread with an example. We had a downtown C-store owner start withdrawing larger than normal amounts of cash weekly. We couldn't figure it out and thought it was suspicious and reportable. The number of reasons we could imagine was greater than the threads would allow. In the end we asked. Guess what, she wrote a bad check to a supplier and was put on a cash only basis for 6 months. Being her bank we could verify the check issue was true.

I'm not saying that's the case here, but the point is, you don't know. You need to decide if it's abnormal enough. Randy's point is also very valid as he said above, it's likely this relationship is costing the bank money to operate. Add the risk to that you have for criticism over the transactions and you should have a good explanation or have taken action. Remember the "S" is not for guilty and what if when filed law enforcement puts your SAR and CTRs with any number of others on the same fellow? Conversely, what if they can't? Either way you're covered on the risk side, but still need to address the negative income account.
Posted By: Richard Insley

Re: Suspicious Activity Question - 06/22/21 07:32 PM

If a quarter of a million dollars is flowing through your bank each year, maybe this customer could use other bank services. I'd want to know more about his business to be sure the bank hasn't overlooked a business development opportunity. Has anyone taken the time to do a drive-by at one of his work sites?
Posted By: ACBbank

Re: Suspicious Activity Question - 06/22/21 08:49 PM

Based on some of these posts I'm not sure how long @MBOC has been working in AML or if he/she actually does. There seems to be a lack of understanding of basic AML investigative techniques.

That or it's someone trolling.
Posted By: CI@MBOC

Re: Suspicious Activity Question - 06/23/21 06:05 PM

Originally Posted by ACBbank
Based on some of these posts I'm not sure how long @MBOC has been working in AML or if he/she actually does. There seems to be a lack of understanding of basic AML investigative techniques.
That or it's someone trolling.

I didn't create an account at BO so I could troll. Been in BSA for 20yrs at this point, from AML customer investigations to internal audit to internal employee AML investigations. I came here mostly to ask questions re:CTRs because that's a new realm for me having oversight of it now. But I guess since I haven't been around for 40yrs or 39yrs, feel free to dismiss me.
My point is that BSA is about compliance. The reg req't is to file a SAR, not interrogate your customer about every single transaction they do. Like I said to OP, you could ask 100 people about a case and get 100 different opinions/thoughts because everyone's experience with finances and money and business and industry and knowledge is different. What's exorbitant money to one investigator may be pennies to another. Every alert that generates there's tons of unknowns......incalculable really.....so in order to clear them do you reach out to every customer and have them explain it? Whether that customer is legit or a bad guy, you're getting story A. You think you're going to call a bad guy and he's going to say -- 'Aw shucks! Ya got me. Yeah I work for a cartel in my free time and I was trying to be crafty working as a carpenter, but you caught me. Had you not called me I would have never gotten caught!"

I've never exited/closed a customer because they're "money losing" or because we file SARs on them. Are folks here actually as a part of their investigation(s) analyzing a relationship's profitability before they file a SAR?
I'd love to know from FinCEN how many SARs get filed annually that never get touched or read or accessed. BSA compliance is a huge time/resource suck, file SARs on stuff that is completely unreasonable and suspicious. A contractor doing $250k in transactions per year is nothing where I'm at, likely wouldn't even hit our alert rules.
All good though, have at it. I'll stay out of it from here on.
Posted By: ACBbank

Re: Suspicious Activity Question - 06/23/21 09:59 PM

If $250,000 in cash doesn't generate some kind of alert to review, you may have bigger problems than you realize. Unless this is a really unique example I can't see how that amount of cash, through a personal account no less, shouldn't generate some kind of alert.

I also think your example is inaccurate. Are there some cases where people will view what is suspicious differently? Absolutely. However, there are also other cases where the majority of reasonable and experienced AML professionals will agree that the activity warrants a SAR to be filed.

That's what happening here. You have different posters with different training, education, experiences, and most of us are indicating that something could be suspicious here and further due diligence is required.

I could say more but I'm not sure it would be helpful to the discussion.
Posted By: Lindsay H

Re: Suspicious Activity Question - 07/01/21 08:49 PM

Maybe I've missed it through the thread. I think an important question to include is - are the checks being cashed drawn on the same bank they are cashed at. Is it a customer cashing a non-customer check or a customer cashing a customer check (and avoiding fees by being a low dollar deposit customer)

There is always the added risk in building that the builder has cash flow problems and contractors cash the checks and deposit at their primary bank to avoid returned items. We've had builders suddenly go bankrupt leaving contractors with bounced checks. He may have been burned previously.

Ultimately - I agree with your previous post. Each investigator is going to look at it differently and have a bunch of opinions. No harm in asking a few additional question and at the end of the day just be ready to defend your position.