Structured Cash Deposits and a 48-Lakh RTGS: Reporting or Exiting?
A savings account in the name of a 26-year-old was opened eight months ago at a semi-urban branch with Aadhaar and PAN, showing occupation 'consultant' and annual income of Rs 3.20 lakh. Since opening, the branch has received 212 cash deposits, mostly between Rs 45,000 and Rs 49,000, aggregating Rs 96 lakh, including several made on the same day at two different branches of the bank. On 3 February an RTGS credit of Rs 48 lakh arrived from a firm that banks elsewhere, and within 36 hours four RTGS transfers of about Rs 11.90 lakh each left to accounts in three different states. The customer says the money is 'consulting receipts from overseas clients' but has produced no invoice, contract or foreign inward remittance record. The branch manager wants to close the account immediately to avoid regulatory trouble and has told the relationship manager to warn the customer that the account may be closed because of 'reporting issues'. The bank's principal officer has not yet been informed.
1. Identify which reports this activity triggers, to whom they go, and whether any monetary threshold has to be crossed.
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Cash deposits - CTR and STR together. Each deposit is below Rs 10 lakh, but the counter transaction report applies to cash transactions above Rs 10 lakh, and to a series of transactions that are integrally connected - deposits of Rs 45,000-49,000 made on the same day at two branches of the same bank are exactly that. The monthly aggregate crosses Rs 10 lakh, so a CTR is due to FIU-IND. Independently, 212 deposits deliberately kept just under Rs 50,000 is textbook structuring, which is a suspicious-transaction indicator regardless of amount.
The RTGS flows - STR. A Rs 48 lakh credit immediately fragmented into four transfers to three states, with no invoice or contract and with an income profile of Rs 3.20 lakh, cannot be explained by the customer's stated business. An STR goes to FIU-IND. There is no monetary threshold for an STR - suspicion is the trigger, and it must be filed as soon as suspicion is established, without waiting for proof.
Not a CBWTR. The cross-border wire transfer report applies to cross-border transfers above Rs 5 lakh involving India. This RTGS credit is domestic, so CBWTR does not apply - but the customer's claim of 'overseas clients' should be tested against the bank's foreign inward remittance records; if no such remittances exist, that is itself an adverse finding.
Records: preserve the account records and the STR documentation for the period prescribed under PMLA.
2. Evaluate the branch manager's two proposals - immediate closure and warning the customer. What is the correct course of action?
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The warning is unlawful. Telling the customer that a report has been or may be filed is tipping off, which is expressly prohibited under the PMLA framework. It would let the customer move the funds and destroy the paper trail, and it exposes the bank and the officer to penalties. Stop this instruction immediately and record that it was given.
Closure is not a solution. Closing an account does not discharge the obligation to report the transactions that have already been put through; the STR is about past conduct, not future banking. Summary closure also destroys the audit trail and looks like the bank is helping the customer disappear. It also runs against the bank's own account-exit policy, which requires a documented decision by senior management with reasons recorded.
What to do instead:
- Escalate to the principal officer today; the branch manager has no authority to decide.
- File the STR on the transactions already seen, and the CTR for the cash.
- Apply enhanced due diligence: source of funds for the Rs 48 lakh, invoices and contracts, the identity of the remitter firm and its beneficial owners, a site visit, adverse-media screening.
- Restrict operations if policy permits - credits allowed, debits only with approval - pending the explanation.
- If the customer cannot explain the flows, exit the relationship through the documented exit route, with reasons recorded, after the STR is filed and with the principal officer's approval.
- Raise the customer's risk rating to high and shorten the periodic review cycle.
3. Map this account to the stages of money laundering and list the enhanced due diligence measures you would document before any further operation is permitted.
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Stages.
- Placement: the 212 cash deposits are the entry of cash into the formal system - the riskiest stage for the launderer and the point at which detection is easiest.
- Layering: the Rs 48 lakh RTGS credit fragmented within 36 hours into four transfers of about Rs 11.90 lakh to accounts in three states is classic layering - splitting, geographic dispersal and near-threshold sizing to break the audit trail.
- Integration: not yet visible here; the funds have not returned to the customer as apparently legitimate money. That is precisely why the trail must be preserved now.
EDD documentation to place on file:
- Updated customer profile: actual nature of business, list of clients, expected turnover and expected transaction pattern, re-verified against the declared Rs 3.20 lakh income.
- Source of funds and source of wealth for the Rs 48 lakh; copies of invoices, contracts, bank statements of the remitter firm.
- Beneficial ownership and adverse-media checks on the remitter firm and on the four recipients.
- Purpose of each outgoing transfer and the relationship with each recipient.
- Site visit report and photographs of the stated place of work, and verification of the 'consultant' claim.
- Senior management approval for continuing the relationship, and a note of the risk rating assigned.
- A documented rationale for every debit permitted while the review is open, so that the bank can show it acted on suspicion rather than on instruction.