Structured Cash Deposits and an Unavailable Principal Officer

Yes. The pattern is classic structuring: repeated cash deposits kept just below the reporting threshold, split across branches, followed by quick transfers to a newly opened related account. The bank must aggregate cash transactions across branches and across the customer's accounts. If the aggregate cash deposits in a month exceed the prescribed threshold, a cash transaction report is required. More importantly, the bank has reasonable grounds to suspect that the funds may be proceeds of crime or are being layered, which requires a suspicious transaction report to FIU-IND. The 'below Rs 10 lakh' argument is irrelevant because structuring itself is a red flag.

The customer's refusal to explain the source of funds, the common mobile number, and the rapid transfers to a new entity increase the suspicion. The branch manager's view that a long-standing membership cures the risk is not acceptable; member status does not displace AML obligations. The bank should not close the alert without documented analysis. It should conduct enhanced due diligence, identify the beneficial owner of Shree Consultancy, and consider restricting the account until the explanation is satisfactory.

The bank should immediately designate an alternate principal officer or a senior officer to handle the matter, preserve all records, and escalate it to the AML committee. It should file a suspicious transaction report without delay and, where the cash threshold is met, ensure the cash transaction report is filed. It should not tip off the customer. The bank should review both accounts, check for other linked accounts or mule activity, and decide whether to freeze, restrict or exit the relationship under its board-approved policy.

The board should also fix the control gaps: no alternate principal officer, a 45-day-old alert, and branch-level threshold gaming. It should require centralised monitoring across branches, maker-checker review of alerts, staff training, and a monthly AML dashboard to the audit committee. The principal officer should have independent access to the board. Disciplinary review may be needed if staff deliberately ignored the pattern. The bank should document why it did or did not exit the relationship, because regulators will test the quality of that judgement.

It must not tip off the customer or any third party that a report has been filed. It must not destroy or alter records, and it must not close the account abruptly without a risk assessment, because closure can itself alert the customer and disrupt monitoring. It should not stop normal monitoring after filing; the STR is a reporting obligation, not a substitute for risk management. It must not disclose the STR to the branch in a way that compromises confidentiality, and it must not treat the filing as a reason to ignore the underlying KYC deficiencies.

The bank should continue to apply enhanced due diligence, retain transaction records for the prescribed period, and cooperate with the FIU or investigating agencies if approached. The principal officer should maintain a confidential register of reports and the board should receive aggregate, non-customer-specific information. If the customer later provides a credible explanation, the bank should document it, but it should not withdraw an STR merely because the customer is influential or a member.