Twenty-Eight Cash Deposits and a Same-Day RTGS Out
The current account of a hardware trading partnership firm, opened seven months ago at a semi-urban branch, was almost dormant until the last fortnight. Between 3 and 14 March it received twenty-eight cash deposits of ₹48,000 to ₹49,500 each, totalling ₹13.62 lakh, made at four different branches, twenty of them by a person other than the account holder. On 15 March the entire balance was transferred by RTGS to a newly added beneficiary, a proprietorship firm in another state. The registered mobile number was changed twice in February, once at a branch where the firm is not known. One of the two partners is an elected municipal councillor. The branch manager learns all this while clearing the RTGS on the morning of 15 March, and the beneficiary account is with another bank.
1. Identify the suspicious-transaction indicators in this account and explain what each one suggests.
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Each fact is individually common; together they form a pattern:
- Deposits just under ₹50,000. Twenty-eight deposits of ₹48,000–₹49,500 look calibrated to stay below the ₹50,000 threshold at which PAN must be obtained for cash deposits. That is the classic signature of structuring - deliberately splitting to avoid a reporting or identification trigger.
- Aggregate well above ₹10 lakh in a month (₹13.62 lakh). Structuring does not prevent the aggregate from crossing the CTR threshold; it only shows intent to avoid scrutiny.
- Third-party cash deposits. Twenty deposits were made by someone other than the account holder. Cash from unidentified persons into a firm's account is a known mule/placement pattern.
- Multiple branches. Deposits spread across four branches reduce the chance that any one branch sees the pattern.
- Dormant-then-active account. A seven-month-old account with little activity suddenly handling ₹13.6 lakh is inconsistent with its profile.
- Immediate full transfer to a new beneficiary in another state. Funds in and straight out, with no business retention, suggests the account is a conduit.
- Two mobile-number changes in a month, one at an unknown branch. This is typical of account takeover or mule control.
- PEP connection. An elected municipal councillor as partner does not make the account criminal, but it does require enhanced due diligence and senior-management approval.
The correct conclusion is not 'fraud proven' but 'reasonable ground for suspicion, requiring EDD and reporting'.
2. Which reports must the bank file - CTR, STR or both - and on what timeline? Explain the difference.
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Both are required, and one does not substitute for the other.
- CTR is rule-based and suspicion-free. Aggregate cash deposits exceeding ₹10 lakh in a month in a customer account must be reported, irrespective of whether anything looks wrong. Here ₹13.62 lakh crosses that line, so a CTR is due by the 15th of the following month through the prescribed reporting channel to FIU-IND.
- STR is judgement-based and has no monetary threshold. The structuring, third-party deposits, sudden beneficiary and mobile-number changes together give reasonable grounds to suspect that the funds are proceeds of crime or that the account is being used to channel them. The STR should be filed within seven days of establishing the suspicion.
Key disciplines:
- Do not decide that 'the CTR already covers it'. The CTR records the amount; the STR records the suspicion.
- Do not tip off the customer or the beneficiary bank about the STR - this is a statutory prohibition.
- Document the rationale and date on which suspicion was formed, because the seven-day clock runs from that date.
- Retain records for the prescribed period and keep the STR confidential from branch staff who do not need to know.
A manager who files only the CTR has done the mechanical duty and missed the substantive one.
3. What should the manager do about the RTGS on 15 March and the account relationship?
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The RTGS. Clearing it immediately would move the funds beyond the bank's reach. The manager should seek clarification from a higher authority (compliance/AML cell) before release, and where the bank's procedures permit, hold or return the transaction pending inquiry. Delaying a customer's valid payment carries its own risk, so the decision and reason must be recorded in writing and taken at the appropriate level, not by the branch alone.
Enhanced due diligence. Obtain the partnership deed, beneficial ownership of both partners, KYC of the person making the cash deposits, source of funds for the cash, and the underlying invoice or contract for the RTGS. Ask why cash was deposited at four branches and why the mobile number changed twice.
PEP. The councillor partner requires senior-management approval for continuing the relationship and a source-of-wealth check. Being a PEP is not a bar to banking, but it mandates EDD.
Relationship decision. If the documents are unsatisfactory, restrict the account (no further cash credits, no new beneficiaries) and exit with documented approval. Do not simply close the account and return the money without reporting - that cleans the book and leaves the network intact.
Record everything so that the file can show what was known, when, and what was done.