Jewellery Proprietorship, Structured Cash Deposits and a ₹25 Lakh Withdrawal Request
A proprietorship jewellery showroom has banked with the same branch for eight months. Its account was risk-rated high at onboarding. In the last 11 days it has received 14 cash deposits, each between ₹8.8 lakh and ₹9.7 lakh, totalling ₹1.31 crore. Five deposits were made by individuals who are not proprietors or employees, and two were accompanied by cheques from a property firm. The account opening form declared annual turnover of ₹75 lakh and expected monthly cash deposits of ₹6 lakh. The proprietorship’s GST returns show quarterly turnover of ₹18–22 lakh. The relationship manager says the customer is a known jeweller and has referred two fixed-deposit customers. No suspicious transaction report has been filed. The branch receives a call from the customer asking whether he can withdraw ₹25 lakh in cash on Friday for a supplier payment.
1. Identify the red flags in this account and state which reports the bank should consider filing, with reasons.
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The pattern shows classic structuring indicators: 14 cash deposits kept just below ₹10 lakh, aggregating ₹1.31 crore in 11 days. Third-party deposits, cash accompanied by property-firm cheques, a declared turnover of ₹75 lakh against GST turnover of ₹18–22 lakh per quarter, and actual deposits far above the expected ₹6 lakh a month are inconsistent with the stated business. The account is new and high-risk. These facts create reasonable suspicion, not merely a large-transaction issue.
The bank should consider a Suspicious Transaction Report to FIU-IND. An STR does not require proof of crime and has no monetary threshold; it is based on reasonable suspicion. It should also review Cash Transaction Report obligations for aggregate cash transactions above the prescribed threshold, but a CTR is not a substitute for an STR. Enhanced due diligence should establish the source of funds, beneficial ownership, nature of the jewellery business and the relationship with third-party depositors. The branch must not tell the customer that a report is being considered. The relationship manager’s personal endorsement and deposit referrals do not outweigh the transaction pattern.
2. How should the branch handle the account and the request for a ₹25 lakh cash withdrawal while the review is underway?
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The bank should not freeze the account automatically or refuse solely because the customer is high-risk. It should apply enhanced scrutiny: verify the supplier, invoice, contract and payment purpose; confirm the customer’s identity and authority; check whether the withdrawal is consistent with the business and prior conduct; and obtain senior-management approval under the high-risk policy. A ₹25 lakh cash withdrawal is unusual and needs source and end-use documentation. If the explanation is unsatisfactory or inconsistent, the bank may decline the transaction, file or update the STR, and consider exit.
The branch must avoid tipping off. It should not mention the STR or use the review as a pretext to embarrass the customer. Communications should be professional and documented. If the bank continues the relationship, it should set exposure limits, monitor deposits and withdrawals closely, refresh KYC and consider whether the risk rating remains appropriate. Any decision to close the account should follow the bank’s policy and applicable contract terms, with a documented rationale.
3. The relationship manager wants to warn the customer that a report may be filed so that he can regularise his tax position. What is wrong with this, and what should the branch do?
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Warning the customer would be tipping off, which is prohibited under the anti-money-laundering framework. It could prejudice an investigation and expose the bank and the employee to regulatory and criminal consequences. The relationship manager’s intention to help the customer does not make the disclosure permissible. Suspicious-transaction reporting is confidential, and the customer should not be told that an STR has been or may be filed.
The branch should immediately stop the manager from contacting the customer about the report, escalate the matter to compliance, and preserve all records. The manager should receive counselling or training, and the incident should be assessed under the bank’s disciplinary process if confidential information was already shared. If the customer asks about the delay or scrutiny, the branch may explain only the normal documentation requirements for a large cash withdrawal. It should not confirm or deny any report. The STR, if filed, must be complete and timely, and the branch should continue monitoring without alerting the customer.