High-Value Cash Deposits and Structured Patterns
You are the MLRO at a mid-sized retail bank. A customer, Mr. A, has a personal current account that typically receives a monthly salary of £2,500 and occasional small transfers. Over the past three months, he has made 12 cash deposits, each between £9,000 and £9,800, at different branches. The deposits are always in £50 notes and occur on Fridays. When questioned, Mr. A said he sells used cars privately and receives cash payments. He provided a handwritten sales log showing 10 sales, but the amounts and dates do not match the deposits. His account has no other business activity. The bank's threshold for reporting cash transactions is £10,000. The branch staff have not filed any internal reports. Your team is reviewing the case.
1. What typology does this activity most likely represent, and what specific red flags support that conclusion?
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The activity strongly suggests structuring (smurfing) to evade the £10,000 reporting threshold. Red flags include:
- Multiple deposits just below threshold: 12 deposits of £9,000–£9,800, all under £10,000.
- Pattern and frequency: Consistent weekly deposits on Fridays, across different branches, indicating deliberate avoidance of scrutiny.
- Inconsistent with profile: A salaried individual with no business account receiving large cash sums; the claimed car sales are not reflected in the account activity.
- Documentation mismatch: The handwritten log does not reconcile with deposit amounts or dates, suggesting fabrication.
- Cash-intensive nature: £50 notes are common in illicit cash, though not conclusive alone. The combination of these factors, especially the threshold avoidance and inconsistent explanation, is classic structuring.
2. Should the bank file a suspicious activity report (SAR)? Justify your answer and outline the immediate steps the MLRO should take.
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Yes, a SAR should be filed. The activity meets the threshold for suspicion: the pattern of deposits just under the reporting threshold, inconsistent with the customer's profile and with no credible explanation, gives rise to knowledge or suspicion of money laundering. The MLRO should:
- File a SAR with the Financial Intelligence Unit (FIU) promptly, including all details of the deposits, the customer's explanation, and the discrepancies.
- Consider a defensive SAR if there is any delay in investigation, to protect the bank from tipping-off allegations.
- Do not tip off the customer; continue normal monitoring but avoid alerting him.
- Review the customer's risk rating and consider exiting the relationship after SAR filing, in line with policy.
- Document the decision and rationale for the SAR and any subsequent action.
- Provide feedback to branch staff on recognizing structuring and the importance of internal reporting.