Avoiding suspicious activity reports in cash transactions

 Many people ask “what is considered illegal or suspicious activity when carrying cash?”. Some people have gone to the bank with cash from a weekend garage sale or car sale and have told horror stories of encountering numerous questions from bank employees and sometimes being reported to the government as suspected criminals.

The truth is that such denunciations are very reasonable. Most western countries have enacted cash transaction legislation requiring it. In Australia, any money over $10,000 must be reported to regulators, and any money under that amount that bank staff find suspicious must also be reported. Likewise, in the US, if you look unusually scruffy and walk into a bank with $4,000 in cash to deposit, you are very likely to be reported by the teller (see our Money Laundering Defined article on www.powerprivacy.com for more information on US Money Transfer Reports or CTRs).

Here is a list of most things that can trigger staff suspicion and get you reported the next time you go to the bank. Banks will not give you a list of these criteria or even acknowledge their existence, no matter how much you ask:
– If a customer refuses to show identification or explain the purpose of a transaction.
– A customer has a known criminal history and is involved in significant transactions.
– The client is unaware of the basic facts about the transaction or is indifferent to fees, taxes, etc.
– The client is controlled by another person, especially if the client appears to be unaware, incapacitated or elderly and is accompanied by someone who is not a relative.
– A customer conducts cash transactions when their business or job does not normally generate or require that amount of cash.
– A customer repeatedly sends or receives remittances of any dollar amount when his or her business does not normally require or generate such remittances.
– A customer has no apparent source of income, but performs repeated transactions.
– A customer offers a gift, tip, or bribe to a merchant to complete a transaction.
– A customer splits transactions into smaller amounts to avoid identification or reporting requirements.

Suspicious Customer Behavior
– The client has an unusual or overly nervous demeanor.
– The customer discusses your recordkeeping or reporting tasks in an attempt to avoid them.
– The customer threatens an employee who tries to interfere with a record-keeping or reporting task.
– The client is reluctant to proceed with a transaction after being told it needs to be reported.
– The customer offers to pay a tip to a financial institution employee.
– The customer appears to have a hidden agenda or exhibits abnormal behavior, such as bypassing the chance to obtain a higher interest rate on a large account balance.
– The client, a public official, opens an account in the name of a family member who begins making large deposits that are not consistent with the family’s known legitimate sources of income.
– The client deposits large amounts of cash without counting the cash.
– The client frequently exchanges small bills for large bills.
– The client’s cash deposits frequently contain counterfeit banknotes or banknotes that are moldy or heavily soiled.
– The client, who is a student, transfers or exchanges unusually large amounts of money.
– The account shows a high speed of funds movement but maintains low beginning and ending daily balances.
– The transaction involves correspondence that is copied instead of on original letterhead.
– The transaction involves offshore institutions whose names are similar to those of recognized legal financial institutions.
– The transaction involves foreign countries or islands that cannot be found on an atlas or map.
– The agent, lawyer or financial advisor acts on behalf of another person without proper documentation such as a power of attorney.

Suspicious Customer Identification Situations
– The customer presents unusual or suspicious identity documents and does not want to provide personal background information.
– The customer does not want to provide personal background information when opening an account.
– The customer opens an account without identification, references or a local address.
– The customer’s permanent address is outside the bank’s service area or outside the country.
– The customer’s home or work telephone is disconnected.
– A business customer is reluctant to disclose details about their business activities or provide financial statements or documents about a related business entity.
– The customer does not provide any records of past or current employment in the credit application.
– The customer claims to be a law enforcement agent conducting an undercover operation when there is no valid indication to support this.

Suspicious Cash Transactions
– The client arrives with another client and they go to different tellers to make foreign exchange transactions under $10,000.
– The client deposits a large amount of cash, including many $50 and $100 bills.
– The client opens multiple accounts in one or more names, then makes several cash deposits of less than $10,000.
– The client makes unusual cash transactions through night deposit boxes, especially large sums that are not consistent with the client’s business.
– The customer frequently deposits or withdraws large sums of money for no apparent business reason or for a business that does not typically generate large amounts of cash.
– The customer makes several large cash transactions at different branches on the same day or directs people to do so on their behalf.
– The client deposits cash under $10,000 into several accounts and then consolidates the funds into a single account and wires them out of the country.
– The client attempts to recover part of a cash deposit in excess of $10,000 after the client learns that a foreign exchange transaction report will be issued on the transaction.
– The client makes several cash deposits of less than $10,000 at automated teller machines.
– The corporate account predominantly deposits or withdraws cash instead of checks.
– Client frequently deposits large amounts of cash wrapped in currency tapes stamped by other banks.
– The client frequently purchases monetary instruments for cash in amounts less than $10,000.
– Client makes an unusual number of currency exchange transactions.
– Client frequently uses foreign currency to purchase bank checks for less than $3,000.

Suspicious Non-Cash Deposits
– The client deposits several travelers’ checks, usually in the same denomination and in sequence.
– The client deposits money orders with unusual markings.

Suspicious Wire Transactions
– The non-account payee sends a wire transfer with funds containing a large number of monetary instruments of less than $10,000 each.
– An incoming wire transfer contains instructions to convert the funds into bank checks and mail them to a non-account payee.
– A wire transfer carrying large sums of money to secret havens such as the Cayman Islands, Hong Kong, Luxembourg, Panama or Switzerland.
– The immediate purchase of monetary instruments by the beneficiary to pay another party following an incoming wire transfer.
– An increase in international wire transfer activity in an account with no history of such activity or where the client’s stated business does not require it.
– Frequent remittance of the client’s so-called international profits outside his or her home country.
– The client receives a large number of small remittances and then orders a large remittance to another country.
– The client deposits bearer instruments and then instructs to transfer the funds to a third party.
– Wire transfers or cash deposits of less than $10,000 into an account opened in the name of a foreign exchange bureau.

Suspicious Safe Deposit Box Activities
– The client’s activity in the safe deposit box area increases, possibly indicating that a large amount of cash is being stored.
– The client usually visits the safe deposit box area just before making a cash deposit of less than $10,000.
– The customer rents more than one safe deposit box.

Suspicious Activity in Credit Transactions
– Statements are made in a client’s financial statement that are not in accordance with GAAP.
– A transaction is made to appear more complex than it should be by using impressive but meaningless terms such as “emission rate”, “prime bank notes”, “standby commitment”, “arbitrage” or “hedge contracts”.
– The client requests loans to offshore companies or loans secured by obligations of offshore banks.
– The client suddenly pays off a large non-performing loan without a reasonable explanation for the source of funds.
– The client purchases certificates of deposit and uses them as collateral for a loan.
– Client collateralizes a loan with cash deposits.
– Client uses cash collateral located overseas to obtain a loan.
– The client’s loan proceeds are unexpectedly transferred offshore.

Suspicious Trade Account Transactions
– A business client presents financial statements that are markedly different from those of similar businesses.
– A large business presents financial statements that have not been prepared by an accountant.
– The retail business that provides check cashing services does not make large cash withdrawals against check deposits, possibly indicating that it has another source of cash.
– The client maintains an excessive number of accounts for the type of business allegedly conducted.
– The corporate account shows little or no regular, periodic activity.
– A transaction contains conditions that would cause a banker to reject a loan application due to doubts about the validity of the collateral.

Suspicious Trade Finance Transactions
– The Client requests trade finance for the export or import of goods whose stated prices are significantly more or less than those in a similar market situation.
– The Client changes the beneficiary of the letter of credit immediately before payment is made.
– The customer changes the place of payment in a letter of credit to an account in a country other than the one specified by the beneficiary.
– The client’s standby letter of credit is used without normal reference to an underlying project or contract or as an offer or performance guarantee in favor of unusual beneficiaries.

Suspicious Investment Activities
– The client uses an investment account as a pass-through vehicle, especially to transfer funds to off-shore locations.
– The investor seems disinterested in the usual decisions that need to be made about an investment account, such as fees or suitable investment vehicles.
– The client wants to liquidate a large position through a series of small trades.
– The client deposits cash, money orders, traveler’s checks or cashier’s checks in amounts under $10,000 to fund an investment account.
– Client cashes out or surrenders annuities early during the “free look” period.

Suspicious Employee Activity
– The employee exaggerates a client’s credentials, background or financial ability and resources in written reports requested by the bank.
– The employee is frequently involved in unresolved exceptions or repeated exceptions in exception reports.
– The employee leads a lavish lifestyle that cannot be supported by their salary.
– Employee frequently overrides internal controls or established approval authority or circumvents policy.
– The employee uses company resources for private gain.
– The employee assists in transactions where the identity of the ultimate beneficiary or counterparty is not disclosed.
– Employee avoids taking vacations.