Examkin

Question

Difficulty: HardAnti-Money Laundering (AML), KYC, and Sanctions Compliance

A retail client deposits 7,500inphysicalcashintotheirbrokerageaccountatabranchofficeonMondaymorning.OnWednesdayofthesameweek,theclientreturnstodepositanadditional7,500 in physical cash into their brokerage account at a branch office on Monday morning. On Wednesday of the same week, the client returns to deposit an additional 4,500 in physical cash and inquires whether the firm reports cash transactions to the federal government, asking to cancel the second deposit if any regulatory filing would occur. Under FinCEN and FINRA anti-money laundering (AML) regulations, which of the following describes the broker-dealer's reporting requirements?

  1. The firm must file a Suspicious Activity Report (SAR) within 30 calendar days due to suspected structuring, but is not required to file a Currency Transaction Report (CTR) because cash deposits did not exceed $10,000 on a single business day.Answer
  2. B
    The firm must file a Currency Transaction Report (CTR) within 15 calendar days because total cash deposits within the calendar week exceeded $10,000, but is prohibited from filing a Suspicious Activity Report (SAR).
  3. C
    The firm must file both a Currency Transaction Report (CTR) and a Suspicious Activity Report (SAR) within 15 calendar days, and must provide written notice to the client regarding the reports.
  4. D
    The firm must file a Suspicious Activity Report (SAR) within 15 calendar days only if the client completes the second transaction, but no action is required if the second deposit is cancelled.

Answer

The firm must file a Suspicious Activity Report (SAR) within 30 calendar days due to suspected structuring, but is not required to file a Currency Transaction Report (CTR) because cash deposits did not exceed $10,000 on a single business day.
The correct answer accurately distinguishes between CTR and SAR requirements. CTRs are required for physical cash deposits exceeding 10,000inasinglebusinessday(filedwithin15days).Becauseneitherindividualcashdepositexceeded10,000 in a single business day (filed within 15 days). Because neither individual cash deposit exceeded 10,000 on a single day, no CTR is triggered. However, breaking up cash deposits and asking to avoid reporting constitutes potential structuring, which is an illegal activity. Broker-dealers must file a SAR for suspicious transactions involving $5,000 or more within 30 calendar days and must keep the filing confidential from the client.

Step-by-Step Solution

1
Evaluate Currency Transaction Report (CTR) requirements
No single-day cash deposit exceeded 10,000(10,000 ( 7,500 on Monday and $4,500 on Wednesday), so no CTR filing is required.
CTRs are mandatory under the Bank Secrecy Act only when cash transactions by or on behalf of a single entity exceed $10,000 in a single business day.
2
Evaluate Suspicious Activity Report (SAR) requirements
A SAR must be filed within 30 calendar days of detecting suspicious activity.
Attempting to structure cash deposits to evade reporting or asking to cancel deposits to avoid government reports involves $5,000 or more in funds and represents a major AML red flag.
3
Check SAR confidentiality requirements
The firm must maintain absolute confidentiality regarding the SAR filing and must never inform the customer.
Federal law strictly prohibits disclosing to the subject of a SAR that a report has been or will be filed.

Key Concept

AML Reporting Thresholds and Timelines (SAR vs CTR)
Rate this question

Topics

Anti-Money Laundering (AML), KYC, and Sanctions Compliance