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September 21, 2023Nevertheless, Fincrime has surged and now touches the rooftop. Governments and Regulators are trying to regulate the KYC and AML to combat Fincrime. Since 2021, there has been active progress against Money Laundering and Terrorism Funding.
Let’s talk further about how CTR is related to KYC/AML compliance and reporting suspicious transactions in the banking sector.
What is CTR (Currency Transaction Report)?
A Currency Transaction Report (CTR) is a document 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 an AML 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 the individuals to comply with the regulations. However, few exceptions can be made to this requirement.
Non-Regulated Entities by Currency Transaction Report
Entities that are not required 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 the law enforcement agencies without any concrete proofs.
The Money Laundering Control Act 1986
Outrightly, Congress stated that FIs (Financial Institutions) cannot 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.
What is the Currency Transaction Report (CTR) Form?
FinCEN Form 104 is available on the official website and banks provide this form to customers who have made a transaction of $ 10,000 or more. Here are the key components of the CTR Form:
| Filer Information | Name, address, and contact details of the financial institution filing the report. |
| Subject Information | Name, Date of birth, Address, and social security number (SNN) or Tax Identification Number (TIN) of the individual conducting the transaction. |
| Transaction Information | This section captures details about the currency transaction itself, including the type of transaction (e.g., deposit, withdrawal, exchange), the date of the transaction, the amount in U.S. dollars, and the account numbers involved. |
| Suspicious Activity | If the transaction is flagged as suspicious, there is a section for providing additional details about the suspicious activity. |
| Filing Institution Information | This section includes information about the financial institution’s representative who is filing the CTR, including their name, title, and contact information. |
| Certification | This section is for certifying the accuracy of the information provided on the form. |
| Additional Information | This section may include space for any additional information or remarks related to the transaction. |
| Signature | The form has spaces for the signature of the financial institution employee who prepared the report and the signature of the supervisor or authorized personnel who reviewed and approved it. |
How do Banks file a CTR?
In the context of the US, certain software is used for the 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 from 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. However, the procedure of filing a CTR upon conditions remains the same.
- Deposit $11,000 in savings and withdraw $3,200 from checking. Report cash in, no cash out. Transactions don’t meet the threshold.
- Add $11,000 cash in, $12,500 cash out to CTR. Two reportable transactions, but one CTR suffices both.
- 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.
- Deposit $6,000, withdraw $7,000, exchange $5,000 for Euros. Report $11,000 cash in, $12,000 cash out. Transactions exceed the threshold.
How does the CTR supplement KYC & AML procedures?
Currency Transaction Report is an important part of the Anti-Money Laundering procedure or policy. In particular, for the prevention of crimes, 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. CTR helps the regulatory authorities and law enforcement to identify and catch criminals well before time. It is legally binding and it can be presented in court against the 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 a necessary tool to combat the Fincrime in the US. Countries like the UK need robust KYC and AML procedures that entail the CTR electronically. FinCEN enables the online filing of CTR through the BSA e-filing system. As the criminals are advancing with digitalization, the regulatory authorities should improvise too. Such a reporting mechanism helps banks and FIs in detecting & promptly responding to suspicious and risky situations for the mitigation of Money Laundering activity.
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Muhammed Abd'al Bari is a certified Research Professional of KYC AML Guide. Connect with Muhammed on Linkedin
