Bank Secrecy Act CTR and SAR Case Studies

Transcription

1 Bank Secrecy Act CTR and SAR Case Studies Community Bankers for Compliance School DEPOSITS 2016 This publication is designed to provide information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a professional competent in the area of special need should be sought. Copyright 2016 Young & Associates, Inc. All rights reserved Young & Associates, Inc. Page i

2 Table of Contents Case Study 1: CTR Required?... 1 Objectives... 1 Scenarios... 1 Case Study 2: Currency Transaction Report Completion... 2 Objectives... 2 Bank Information... 2 Branch Information... 2 Customer Information... 2 Exercise... 3 Case Study 3: Identifying Potential Suspicious Transactions... 5 Objectives... 5 Scenario Scenario Scenario Case Study Answers... 8 Case Study CTR Required?... 8 Case Study 2 CTR Completion... 9 Young & Associates, Inc. Page i

3 Case Study 1: CTR Required? Objectives The objectives of this case study are to determine whether any of the following currency transactions would require the bank to file a Currency Transaction Report (CTR). Review the details of each transaction and identify which ones would require a CTR. Scenarios Are any of these transactions reportable? Cash deposit of $10, Cash withdrawal of $9, Transfer from savings to checking of $14, Cash deposit of $4, into checking, a $2, loan payment paid in cash, and $4, into savings. Cash deposit of $10, Cash withdrawals of $5, from savings and $6, from checking Exchange of $11, in $10.00 bills to $20.00 bills Exchange of foreign currency to US dollars in the amount of $10, Night drop check deposit of $5, made Sunday night with a $6, cash deposit made Monday to a teller $2, cash deposit made to a teller on Friday night after cutoff, $3, cash night drop deposit made Saturday, $2, cash night deposit made Sunday, a cash purchase of a $3, cashier s check and a $7, cash withdrawal made on Monday Young & Associates, Inc. Page 1

4 Case Study 2: Currency Transaction Report Completion Objectives You are the BSA CTR coordinator for Young Bank in Kent, Ohio. It is Tuesday morning on October 28, 2015 and you have just received the bank s Large Currency Transaction Report for the prior business day s activity. This report identifies, by taxpayer identification number, any aggregate currency transactions of $1,000 or more during the business day. It is now your task, using the information below and the detailed Large Currency Transaction Report found on the next page to complete any necessary Currency Transaction Reports (CTRs). For your reference, information about the bank, its branches, and those affected customers within the cash report is below. Bank Information Bank Name: Young Bank Main office address: 425 Kent Avenue, Kent, OH BSA CTR Coordinator: Your Name Employee ID #: Primary Regulator: FDIC Routing Number: Telephone Number: BSA Officer: Vice President Teresa Wilson Branch Information Branch Number Address Teller #1 Main office Sally Thomas # Main Street, Kent, OH Tom Burris #3 865 State Street, Kent, OH Janis Wilson Customer Information Bob Jones Mr. Jones is a long time deposit customer of the bank. He owns a prominent pawnbroker business ( The Pawn Shop ) on the outskirts of town. He regularly makes large deposits into his personal account, along with his business account. He has been in business for 25 years. His birth date is April 1, His driver s license is from Ohio and the number is J Young & Associates, Inc. Page 2

5 Community Bankers for Compliance School 2016 Sam and Tricia Smart The Smarts are consumer deposit customers. They rarely conduct large currency transaction. Tricia is a school teacher and was born on September 5, Her driver s license is from Ohio and is S She was the only account owner present at the time of withdrawal. Janet Smith Ms. Smith owns the local grocery store The Food Shop. She is a regular customer and conducts multiple deposits throughout the day. Her birth date is August 25, Her Ohio driver s license number is S The Food Shop is a sole proprietorship, but has its own EIN. Lately, you have noticed that she is making deposit at all three of the bank s branch locations. The grocery store is next door to the main office and the other two branches are on the other side of town. Ms. Smith lives about two miles from the main office. Fred Hopkins Mr. Hopkins is a long-time customer of the bank. He averages around $50,000 on deposit at the bank and is retired executive from the local paper manufacturing plant. He spends the winter months in Naples Florida and usually makes a large withdrawal sometime before Thanksgiving. Depending upon how warm the weather is, he hangs around here locally in the fall. His birthday is November 1, His Ohio driver s license is H This transaction will close out his account since he plans to move there permanently by the end of this year. Exercise Using the large currency report on the next page and the information supplied above about each customer, determine whether a CTR is required for any of the customer s cash activity. Also consider whether the customer might be permitted an exemption.. In addition, read the background information above and be prepared to discuss whether any of the subject customer s activity would be considered as suspicious. NOTE: Assume that these transactions occurred in October 2015, although we are using an example dated in Young & Associates, Inc. Page 3

6 CBC School Deposits 2014 Young & Associates, Inc. Page 4

7 Case Study 3: Identifying Potential Suspicious Transactions Objectives Below, you will find a number of differing scenarios that provide transaction details, along with proposed situations, conducted through a bank. Relying on the facts presented, determine for each scenario whether a Suspicious Activity Report (SAR) should be considered. To assist in your assessment, we have provided you with some background information about the bank. Background Facts The bank has seven branch locations, including the main office, which are strategically located in and around a metropolitan area of approximately 500,000 residents. In short, the city where the bank s branches are located encompasses a significant area with the main office located near the center of the city. The distance of the most remote branch (#7) is approximately 20 miles from the city center and generally is a 35 minute drive, assuming normal traffic flow. There are three branches (#4, #5, and #6) located 10 miles from the main office and the remaining two branches (#2 and #3) are within 3 to 5 miles from the main office (#1). The bank s deposit cutoff time for the current day s transactions is 2 P.M. The bank does operate five of its branches on Saturday, but has not opted to open for Sundays (at least not yet.) The heart of the city is the area where three of the bank s locations operate (branches #1, #2, and #3). The remaining four branches are considered to be located in the suburbs. Most of the city s small business owners, a large portion of the bank s commercial customer base, are located in the heart of the city. Scenario 1 Facts Bob, a current commercial checking account customer, lives near branch 7. He owns and operates a prominent grocery business downtown. Bob usually makes all deposits for his business at the main office; however, he occasionally will conduct transactions at the branch near his home. Bob s commercial deposits usually average around $5,500 on Mondays and approximately $3,000 on Tuesday through Friday. It is rare for him to make a deposit on other weekend days, since the grocery has reduced hours on Saturday and is closed on Sundays. This is largely due to low residency downtown. While his grocery has been in business for some time, he only recently opened an account with the bank and cannot yet be considered for CTR exemption status. As a result, the BSA officer has been tracking deposit activity in preparation for exemption eligibility on his one-year anniversary. For some reason, Bob made special comment about when his business would be exempt from those government-required reports. Oddly enough, the bank has only had to file five CTRs since the account s inception nine months ago. Over the past two weeks, his cash deposit activity is as follows (note the following do not factor into the averages listed above): Young & Associates, Inc. Page 5

8 Community Bankers for Compliance School 2016 Week 1: Monday - $9,000 Tuesday - $8,900 Wednesday - $9,900 Thursday - $7,000 Friday - $3,500 As a side note, Bob began making deposit into branches 2 and 5 this week. Week 2: Monday - $7,000 Tuesday - $5,800 Wednesday - $5,000 Thursday - $6,000 Friday - $3,500 This past week, Bob began sending grocery employees to different branches to make deposits. In addition to using branches 1, 2, and 3, he also made Friday s deposit at branch 7. Questions While the last two weeks activity is outside of the norm over the last nine months, does the activity warrant a consideration for a SAR? As part of the SAR evaluation process, what other information might you want to consider before making a final decision? Scenario 2 Facts Susan, an elderly consumer deposit customer, has been a long-time customer for over 20 years and maintains an average balance of $55,000 in her checking, savings, and certificate of deposit accounts. Last Tuesday, she visited the main office to close a recently matured CD and requested the $12,000 in cash. As the teller began completing the CTR and requested to view Susan s ID, Susan asked why. After a moment of thought, Susan decided to take a cashier s check for $3,000 and $9,000 in cash. Upon further review of Susan s account activity, it was discovered that she very rarely makes cash withdrawals for amounts above $200 (over a 24-month period). Questions Has Susan structured her cash transaction? Should the bank file a SAR on Susan? Young & Associates, Inc. Page 6

9 Community Bankers for Compliance School 2016 If not yet, what steps should the bank s BSA officer take to make a final determination on whether or not a SAR should be filed? Scenario 3 Facts Jim, a consumer deposit checking account customer, recently opened a new account at the bank s main office last month. On his account application, he stated he worked at the local brick plant. Average annual wages for jobs at this factory are about $30,000. His opening deposit was a check drawn on his last bank (located in a different state) for $100. As of today (five weeks after account opening) he has yet to provide the bank with photo identification. When approached, he expresses understanding that the bank is need of such information and promises to bring it in as soon as he obtains a new license in the state. The assigned account representative has made three such attempts to secure the identification since account opening. The customer due diligence (CDD) performed at account opening does not reveal any indication of Jim owning or operating a side business that would produce cash deposits. Jim did, however, inquire about the documentation necessary to send and receive funds transfers at account opening and asked about the bank s current certificate of deposit rates, stating he was trying to save for a home. Following his initial deposit, he made two very small currency deposits for $500 and $1,500 in the first week and then the next week, respectively. Given the sizes of the transactions and the unfamiliarity of Jim by the bank s employees, the transactions were not questioned. In addition, his weekly direct deposits from his employer have begun to occur and are around $400 each week. Since week two, he has begun to make regular cash deposits of $500 about three days a week. He always comes into the main office for at least one weekly deposit, but the cash reports show that he also frequents branch two and six, neither of which are near his stated residence. Jim lives by branch seven. In week six, he visited the main office and branch seven to purchase four separate (two at each branch) cashier s checks made payable to himself for $1,000 each. The purchases were made on a Monday and a Thursday. Lastly, in week seven Jim received a funds transfer in the amount of $15,000 from his last bank where he was the originator. Questions Is Jim s account activity indicative of structuring? Assuming you have all the CDD information available at account opening, what other information could you use to make an affirmative decision on whether or not to file a SAR? Young & Associates, Inc. Page 7

10 Case Study Answers Case Study CTR Required? Those transactions listed below that are BOLD would require a CTR: Cash deposit of $10, Cash withdrawal of $9, Transfer from savings to checking of $14, Cash deposit of $4, into checking, a $2, loan payment paid in cash, and $4, into savings Cash deposit of $10, Cash withdrawals of $5, from savings and $6, from checking Exchange of $11, in $10 bills to $20 bills Exchange of foreign currency to US dollars in the amount of $10, Night drop check deposit of $5, made Sunday night with a $6, cash deposit made Monday to a teller $2, cash deposit made to a teller on Friday night after cutoff, $3, cash night drop deposit made Saturday, $2, cash night deposit made Sunday, a cash purchase of a $3, cashier s check and a $7, cash withdrawal made on Monday Young & Associates, Inc. Page 8

11 Community Bankers for Compliance School 2016 Case Study 2 CTR Completion Transactions requiring a CTR Based on the activity, the following transactions present on the large currency report would require a CTR. Completed CTRs follow this page for those identified reportable transactions. Bob Jones (dba The Pawn Shop) deposit of $12,000. Janet Smith and The Food Shop combined deposit of $10,050.20, along with the $4,500 in currency from Ms. Smith to purchase monetary instruments. Fred Hopkin s cash withdrawal (cashed check) of $12,500 Possible Suspicious Activity Bob Jones Based on the information from yesterday s transactions, nothing immediately appears suspicious. However, further review of the number and amount of deposits might reveal whether suspicious activity is present. Tricia Smart The withdrawal of such an amount, on the surface, is not necessarily suspicious. Since the couple makes very few large dollar withdrawals, you might consider reviewing the account to determine the initial source of funds (i.e., from accumulated savings, etc.), as well as whether any subsequent large currency transactions occur. Janet Smith Ms. Smith might just be up to something. While she does own a prominent, and otherwise legitimate business, the fact that she has deposited moderate amounts of currency into her personal account, her recent purchase of three separate cashier s checks (all for the same amount), and using two different branch locations on the same day might indicate possible structuring. Further review of her account history, along with short-term monitoring of future activity would certainly be justified at this point. Fred Hopkins Mr. Hopkins appears to be a normal, low-risk consumer customer that routinely makes large cash withdrawals before winter for his time spent in Florida. Given his past employment as an executive, it is likely for him to carry such high balances. There does not appear to be any suspicious activity taking place at this time. Young & Associates, Inc. Page 9