Eleven Cash Deposits and a Same-Month RTGS Transfer
During a routine review, the branch's AML cell notices the following on the savings account of a member who joined six years ago. His KYC record shows occupation “agriculturist” and declared annual income ₹3.2 lakh; the account's average balance is about ₹18,000. Between the 3rd and the 27th of last month, eleven cash deposits totalling ₹11,40,000 were made, each between ₹85,000 and ₹1,10,000, mostly at the counter and twice at a cash-accepting ATM. Nine days later ₹10,95,000 left the account by RTGS to an account opened at another bank eleven days earlier. Asked for the source, the member says he sold agricultural land but produces no sale deed, and becomes irritated when the clerk asks again. His last KYC updation was four years ago and the account is currently rated medium risk. The branch's Principal Officer is on leave and the branch manager wants to know what must be filed, by when, and what to do with the account in the meantime.
1. Which reports are triggered by these transactions, and what are the deadlines? Distinguish clearly between the amount-based and the suspicion-based obligation.
Read the worked answer
1. Cash Transaction Report (amount-based). The threshold is ₹10 lakh of cash in an account in a month, and it is the account-level monthly figure that is reported - not each deposit in isolation. The eleven deposits aggregate to ₹11,40,000, above the threshold. Deposits kept below ₹1,10,000 each do not avoid reporting; splitting cash is itself a red flag. The CTR goes to FIU-IND by the 15th of the following month, so the manager must ensure these entries are captured in that month's file even though he did not personally receive the cash.
2. Suspicious Transaction Report (suspicion-based). This has no monetary threshold. The grounds here are strong: deposits out of all proportion to a declared ₹3.2 lakh income, a rapid pass-through with almost the entire balance leaving within days, a counterparty account only eleven days old, and no documentary support for the claimed land sale. The case must be put to the Principal Officer immediately; where he is on leave, the designated alternate officer acts. Filing with FIU-IND is required within seven working days of the officer concluding that suspicion is established.
3. No tipping off. Neither the clerk nor the manager may tell the member that a report is being filed or has been filed. Records of the internal review must be retained.
2. Should the branch freeze or close the account at once? Give your recommendation with reasons.
Read the worked answer
Recommendation: neither freeze nor close at this stage.
Suspicion about the source of funds is not by itself a legal ground to freeze a member's own money, and an unexplained freeze would invite a grievance the branch cannot defend. Abrupt closure is worse: it destroys the transaction trail that the investigation needs, and it signals to the member that he is under scrutiny - a clear tipping-off risk under the anti-money-laundering framework.
What the branch should do instead:
- Reclassify the account as high risk from today and record the reason.
- Apply enhanced due diligence: call for the sale deed, the buyer's identity and payment trail, and the land record extract; keep a written record of what was sought and what was produced.
- Obtain senior management approval to continue the relationship on the current terms, and decline any new facility, overdraft or guarantee.
- Place the account on close monitoring for further cash or pass-through movements.
- Act immediately on any written instruction from FIU-IND or an investigating agency.
If the member refuses all source-of-funds evidence, the branch may consider exiting the relationship - but only with Principal Officer and management approval, and only after the STR is filed.
3. The manager says the KYC is valid for another four years, so nothing needs doing. Is he right? Explain the periodic updation position and what changes now.
Read the worked answer
He is right about the current position and wrong about the position after this review.
Periodic updation runs on the risk category of the account:
- High risk - at least once every 2 years
- Medium risk - at least once every 8 years
- Low risk - at least once every 10 years
The account is rated medium risk and was last updated four years ago, so on the face of the record no updation is overdue.
But risk categorisation is not frozen at account opening. The eleven structured deposits, the near-total RTGS transfer to a brand-new account, and the mismatch with a declared ₹3.2 lakh income mean the account must now be re-rated high risk. That compresses the cycle to two years and, in practice, means re-KYC is due now - refreshed identity and address, updated occupation and income, and a documented source of funds. The manager's reading treats the risk rating as a permanent label rather than a conclusion that has to be revisited whenever the transaction pattern changes.