Financial Crime Enforcement 101
Currency Transaction Report Tutorial
Overview of the Bank Secrecy Act
The purpose of the Bank Secrecy Act is to prevent illegal money laundering activity through financial institutions in this country. The law generally requires all financial institutions to monitor customer behavior, file reports, and maintain records of certain transactions. These reports and records have usefulness to the government in criminal investigations of money laundering, terrorist financing, drug trafficking, tax fraud, and other illegal activity.
The primary report used to track the flow of currency is FinCEN Form 104, also known the Currency Transaction Report or CTR. It must be completed and filed any time an institution engages in a "transaction in currency" that exceeds $10,000.
The CTR collects several pieces of information that describe the transaction. Examples of such information collected include:
- Data on the person or entity conducting the transaction;
- Information on any agents or representatives who may be acting on the customer's behalf;
- Identity verification and other personal data on the transactors;
- Dollar amount and other details of the transaction; and
- Information about your financial institution.
With this information, federal, state and local law enforcement can better track potential illegal activity.
Transactions in currency must be reported
The general rule under the BSA is that "transactions in currency" must be reported.
"Transactions in currency" defined. According to the law, a "transaction in currency" occurs every time a person or a business deposits, withdraws or exchanges more than $10,000 in cash. This definition only includes physical transfers of cash, either in or out of your financial institution. Note that the transaction must involve actual currency in order to be reportable. Deposits or withdrawals by check and other noncash transactions are not subject to the CTR filing requirement.
Also, CTRs are only triggered if a physical transfer or exchange occurs. As a result, transfers between accounts, wire transfers, and other operational transactions that do not involve the physical transfer of cash are not subject to CTR filing requirements. Finally, remember that the CTR filing requirement applies to all types of customers including individuals, businesses and informal groups.
Multiple transactions must be aggregated
Although the threshold for filing a CTR is a transaction in currency that is greater than $10,000, most people do not have that amount of cash on hand. In fact, today's professional money launderer knows better than to conduct cash transactions in such large amounts. If money laundering is the goal, chances are the criminal will make smaller deposits over time in order to make it look more legitimate. Because of this, there are some important aggregation rules in the law that may also trigger a CTR filing.
According to the aggregation rules, your financial institution must aggregate all cash transactions that occur on the same day by or on behalf of the same person. If these transactions total over $10, 000, then a CTR is triggered. Note that in order to be aggregated, the transactions must occur on the same business day, which generally means prior to your cut-off time. Night and weekend transactions are treated as received on the next business day.
The law also requires that transactions from all your locations be aggregated and reported. When looking for multiple transactions by or on behalf of the same person, it is important to consider transactions conducted at both the main office and all branch locations. If a customer conducts transactions at several locations, they should be aggregated. If the total dollar amount exceeds $10,000 in cash, a CTR will be triggered.
The aggregation rules require that your institution develop a way for tracking the activity of each customer on a daily basis.
Review the tracking mechanism your institution has in place for aggregating cash transactions. Keep in mind that sometimes multiple transactions can actually be an indicator of suspicious or illegal activity. This is because many criminals will attempt to break down their transactions and structure them so as to evade the reporting requirements of the law. If you believe illegal or suspicious activity is taking place you may need to file both a CTR and an SAR or Suspicious Activity Report. The requirements for filing an SAR are follow yet another set of BSA rules.
Other Compliance Considerations
In addition to understanding the events that trigger a CTR filing, there are other compliance issues that must be considered when dealing with transactions in currency.
Collect CTR data prior to conducting a transaction in currency. Because of all the detailed information that must be collected, it is best to complete the form, or at least collect the data, prior to accepting the deposit or handing over the cash withdrawal. If you fail to collect the necessary information before you process the transaction, you may make it more difficult for your institution to complete the CTR later.
Complete the CTR properly. Unfortunately, the government is very technical about the completion of a CTR. It is always a good idea to follow the instructions that accompany the form. And if questions arise, call the IRS and ask for help
Comply with the timing requirements. CTRs must be filed within 15 days of the transaction that is being reported. Here again, the government is fairly rigid and delays in filing could evidence a lack of good internal controls.
