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Question

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

A new client visits a broker-dealer branch and deposits $12,000 in physical cash into a newly established account. During the transaction, the client becomes visibly evasive and provides contradictory explanations when asked about the origin of the funds, leading the firm to reasonably suspect that the money is derived from illegal activity. Which of the following statements correctly describes the firm's mandatory reporting obligations under Federal Anti-Money Laundering (AML) regulations?

  1. The firm must file a Currency Transaction Report (CTR) within 15 calendar days for the cash deposit exceeding 10,000,andaSuspiciousActivityReport(SAR)within30calendardaysforthesuspiciousactivityexceeding10,000, and a Suspicious Activity Report (SAR) within 30 calendar days for the suspicious activity exceeding 5,000.Answer
  2. B
    The firm must file only a Currency Transaction Report (CTR) within 30 calendar days, as filing a cash report satisfies all regulatory obligations for single cash deposits.
  3. C
    The firm must file only a Suspicious Activity Report (SAR) within 15 calendar days, because suspicion of illegal activity overrides standard currency reporting procedures.
  4. D
    The firm must file both a Currency Transaction Report (CTR) and a Suspicious Activity Report (SAR) directly with the Securities and Exchange Commission (SEC) within 30 business days of the trade date.

Answer

The firm must file a Currency Transaction Report (CTR) within 15 calendar days for the cash deposit exceeding 10,000,andaSuspiciousActivityReport(SAR)within30calendardaysforthesuspiciousactivityexceeding10,000, and a Suspicious Activity Report (SAR) within 30 calendar days for the suspicious activity exceeding 5,000.
Under the Bank Secrecy Act and FinCEN regulations, broker-dealers face dual reporting obligations when a transaction meets criteria for both cash reporting and suspicious activity. A Currency Transaction Report (CTR) is triggered by physical currency transactions exceeding 10,000inasinglebusinessdayandmustbesubmittedwithin15calendardays.Simultaneously,aSuspiciousActivityReport(SAR)isrequiredwhenthefirmknowsorsuspectsthatfundsstemfromillegalactivityorlackalegitimatebusinesspurposefortransactionsof10,000 in a single business day and must be submitted within 15 calendar days. Simultaneously, a Suspicious Activity Report (SAR) is required when the firm knows or suspects that funds stem from illegal activity or lack a legitimate business purpose for transactions of 5,000 or more; a SAR must be submitted within 30 calendar days. Neither report replaces the other.

Step-by-Step Solution

1
Evaluate the currency transaction reporting requirement.
Because the customer deposited physical cash exceeding 10,000(10,000 ( 12,000 total) in a single business day, a Currency Transaction Report (CTR) is required under the Bank Secrecy Act.
CTRs are mandatory for physical cash deposits or withdrawals over $10,000 and must be filed with FinCEN within 15 calendar days of the transaction.
2
Evaluate the suspicious activity reporting requirement.
Because the firm suspects illegal activity and the amount involved exceeds $5,000, a Suspicious Activity Report (SAR) must also be filed.
SARs are required for suspicious transactions involving $5,000 or more and must be filed with FinCEN within 30 calendar days of initial detection.
3
Combine the regulatory duties.
The broker-dealer has dual, distinct reporting obligations that must both be fulfilled.
Filing a CTR does not negate the requirement to file a SAR, and filing a SAR does not replace the requirement to file a CTR.

Key Concept

Dual AML Reporting Obligations (CTR vs. SAR Thresholds and Deadlines)
Estimated Time:1m 15s
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Topics

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