Currency Transaction Report supplementing the KYC and AML: A Bank’s Perspective

Structuring is breaking the transactions into smaller amounts for forging or evading the Currency Transaction Report (CTR). It is a serious crime under the Federal Law against Fincrime. Structuring is also a part of the Money Laundering process and is punishable by law. (FinCEN)

This article shall answer the following questions in an informative and suggestive manner:

1. What is CTR?
2. What is CTR in Banking?
3. Currency Transaction Report Forms?

Nevertheless, Fincrime has surged and now touches the rooftop. Presently, Governments and Regulators are trying to regulate the KYC and AML to combat Fincrime. Seemingly, it looks like since the year 2021, there has been active progress against Money Laundering and Terrorism Funding.

What is CTR (Currency Transaction Report)?

A Currency Transaction Report (CTR) is a form that financial institutions are required to file with the Financial Crimes Enforcement Network (FinCEN) in the US. It is filed when a customer conducts a transaction involving cash or cash equivalents that exceeds a certain threshold. This report provides information about the transaction, including the customer's identity and the amount of cash involved. So, it can be used to detect and prevent money laundering and other financial crimes.

CTR as a Tool in the US

The U.S. government uses CTRs as a tool to detect money laundering, terrorist financing and other financial crimes. Basically, it is a form used by banks and FIs for any transaction that is greater than $10,000. Additionally, this form is mandatory in both withdrawal and deposit transactions for customers of banks. Besides, these reports supplement the KYC and AML, and they are forwarded to federal agencies for regulations against Fincrime. Furthermore, it is mandatory for individuals to comply with the regulations. However, few exceptions can be made to this requirement.

Entities not Regulated by Currency Transaction Report

Entities that do not require to submit the said report include:

• United States Bank
• Department of Agency of a State
• New York Stock Exchange

Actually, these entities make large transactions that are easy to record and do not pose a threat of structuring. Hence, the regulations of CTR do not apply to them.

What is CTR in Banking?

Initially, the Money Laundering Control Act 1986 was enacted for the purpose of fighting money laundering. When the Currency Transaction Reports were first implemented, the bank teller was the only lead towards suspicious transactions. Similarly, these transactions were reported to law enforcement agencies without any concrete proof.

The Money Laundering Control Act 1986

Outrightly, Congress stated that FIs (Financial Institutions) could not be held responsible for reporting suspicious transactions to law enforcement. Ultimately, the updated version of CTR had a checkbox for suspicious transactions at the top of the Report. In April 1996, the SAR (Suspicious Activity Report) was implemented.

How do Banks file a CTR?

In the context of the US, certain software is used for CTR generation. Electronically, the tax identification number and other customer details are in process during each transaction i.e. $10,000. But if the customer declares through filing a CTR, the bank does not need to file a CTR on his behalf.

Currency Transaction Report and SAR

Meanwhile, if a customer asks to decline the transaction due to the threshold of CTR, the bank should file a SAR. Also, the filing of CTR and then changing requests from customers will result in the cancellation of requests from the banker. So, to avoid it, the criminals use Structuring, and they break the larger funds into smaller pieces. If the structuring is detected, the US Federal Law punishes such an act. Therefore, the banker's software detects such unusual, habitual and suspicious transactions of $10,000 and flags them. Finally, the SAR is filed by the banks against the defaulter.

Some Transactions that trigger the need for CTR

Below are some generic examples of how a CTR is necessitated.  The amounts are more or less the same. But the procedure of filing a CTR upon conditions remains the same.

1. Deposit $11,000 in savings, and withdraw $3,200 from checking. Report cash-in, no cash-out. Transactions don't meet the threshold.
2. Add $11,000 cash-in and $12,500 cash-out to CTR. Two reportable transactions, but one CTR suffices.
3. Deposit $6,000, withdraw $4,000 and exchange $5,000 for Euros. Report $11,000 cash in, no cash-out. Transactions don't meet the threshold.
4. Deposit $6,000, withdraw $7,000, and exchange $5,000 for Euros. Report $11,000 cash in and $12,000 cash out. Transactions exceed the threshold.

How does the CTR supplement the KYC & AML?

A currency Transaction Report is an important part of the Anti-Money Laundering procedure or policy. Especially for the prevention of Fincrimes, CTR is required at every financial institution, including banks. Moreover, to identify and verify the SSN (social security number) in the US for customers who are flagged by the CTR. Normally, this practice is carried out in the UK and other countries as well. Likewise, the customers with commercial accounts or in the case of FIs can also be subjected to CTR filing. Now, CTRs help the regulatory authorities and law enforcement to identify and catch criminals well before time. It is legally binding and can be presented in court against criminals as solid evidence. Further investigations are always required due to the structuring and complex layering in money laundering. Still, the CTR helps in identifying the money launderers.

Closing Thoughts

The Currency Transaction Reports are necessary to combat the Fincrime globally. Countries like the UK need robust KYC and AML procedures that entail the CTR electronically. As criminals are advancing with digitalization, the regulatory authorities should improvise too. Also, the government should minimize corruption at every level and introduce a just, equal and strict AML system through KYC, including automated CTRs.