Vaibhav Traders: Cash Just Below the Threshold and a Fuzzy Sanctions Hit

• Structuring below the cash threshold. Fourteen deposits of Rs 9.20-9.80 lakh, never Rs 10 lakh, on a fixed weekday, across three branches, is the textbook pattern of evading the cash transaction reporting threshold. A Cash Transaction Report is due to FIU-IND where cash deposits/withdrawals in an account aggregate to more than Rs 10 lakh in a month - and here the monthly aggregate is far above that, so a CTR is due regardless; the pattern additionally makes the transactions suspicious, which is a separate obligation.
• Turnover mismatch. Rs 6.80 crore of credits in 9 months against a declared turnover of Rs 1.2 crore annually. The account is being used as a conduit, not a trading account.
• Rapid pass-through. Credits converted immediately into transfers to 11 beneficiaries at other banks, with no retention for operating expenses - inconsistent with genuine scrap trading, where payments to suppliers follow deliveries.
• Sanctions exposure. A 92% fuzzy match with a UNSC-listed entity engages the bank's sanctions screening and the UAPA/UNSC freezing obligations. A partial match is not an automatic freeze but must be resolved, with funds stopped until identity is confirmed or excluded.
• Beneficial ownership and mandate. A non-KYC-verified brother-in-law operating the account breaches the KYC Master Direction: the beneficial owner and all persons with operational control must be identified and verified. The UBO declaration is therefore unreliable.
• Physical mismatch. A single-room office cannot support Rs 6.80 crore of turnover; this is evidence that the stated business is a front.

Each indicator alone can be explained; together they meet the test of reasonable suspicion.

Immediate (same day)

1. Stop operations on the account and place a hold on the balances pending resolution of the sanctions match. Do not simply close the account and return funds - closure after suspicious activity does not discharge the reporting obligation.
2. Escalate to the Principal Officer/Designated Director of the bank. The branch cannot decide a sanctions hit on its own.
3. Resolve the name match against the UNSC consolidated list using secondary identifiers: date of birth, address, passport, registered address of the UAE entity, and the ownership chain. Record the analysis. If it is a confirmed match, freeze without prior notice and report immediately to the Central Government (Ministry of Home Affairs) and to FIU-IND under the sanctions regime; if excluded, document why.

Filings

• Suspicious Transaction Report to FIU-IND within 7 days of establishing suspicion. There is no monetary threshold for an STR; structuring, turnover mismatch, pass-through and the sanctions nexus all qualify. File on the bank's own facts even if the name match is later excluded.
• Cash Transaction Report for the monthly cash aggregates exceeding Rs 10 lakh, by the 15th of the following month.
• Continue filing for the period even if the account is subsequently closed.

Confidentiality. Do not tell the customer or the brother-in-law that a report has been filed or that the account is under review; tipping off is an offence under the PMLA framework.

Records. Retain the KYC records, statements, sanctions-screening results and STR copies for at least five years from the date of the transaction or closure of the account, whichever is later.

Relationship. Do not exit quietly. Exit is appropriate only after the sanctions match is resolved and the STR is filed; where a confirmed match exists, the bank must freeze and report rather than return funds to the customer. If the match is excluded but the structuring and pass-through are proved, exit with a formal termination letter, a re-screening of all related accounts, and reporting of the exit to the Principal Officer. An exit without filings shields the bank from nothing - the PMLA obligation attaches to the transactions, not the relationship.

Enhanced due diligence and look-back.

• Re-run full KYC on the proprietor, the brother-in-law and the UAE counterparty; obtain the ownership chain of the UAE entity and evidence of the underlying trade (invoices, bills of lading, e-way bills, GST returns).
• Conduct a 12-month look-back on all accounts linked by PAN, phone number, address or IP, including the 11 beneficiary accounts, to see whether the same funds loop back.
• Check whether the three branches that accepted the cash deposits had any shared alert; if not, the branch-level monitoring and the central transaction-monitoring system failed to aggregate.
• Reassess the risk rating from low/medium to high and place the customer on enhanced monitoring if the relationship continues.

Accountability. The pattern ran for 45 days across three branches without an alert, and an unverified signatory was allowed to operate the account. This points to a KYC control failure at onboarding and to weak alert aggregation. Refer the file to internal audit and to the staff accountability framework, and document remedial action; regulators examine not just the STR but whether the bank's systems detected the pattern and how quickly it acted.