Six Days, Six Depositors, One Introducer
At a district cooperative bank's semi-urban branch, the manager is under pressure to add ₹1 crore in deposits before the quarter closes. Eleven days ago the branch opened a savings account for Mohan, a man in his thirties who declared his occupation as daily-wage labourer and his annual income as ₹1.8 lakh. The account was introduced by a customer whose own account has been dormant for 14 months. Over the next six working days, six different people walk in between 11:00 and 11:30 am and deposit ₹85,000, ₹90,000, ₹78,000, ₹82,000, ₹95,000 and ₹88,000 in cash - ₹5.18 lakh in all - each saying the money is 'for Mohan's shop'. No shop appears anywhere in his account-opening file. On the seventh day Mohan calls to close the account and transfer the entire balance to another bank in a different state. Separately, the branch's screening tool flags a 72% name match with a politically exposed person; the dates of birth differ by one year. The manager asks you, as compliance officer, whether to allow the closure.
1. Record the red flags and decide whether the branch should close the account and transfer the balance. Give your reasoning.
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Red flags to record
- Six cash deposits of just under ₹1 lakh, on consecutive working days, at the same time, by six different depositors - a classic structuring (smurfing) pattern.
- The declared profile (daily-wage labourer, ₹1.8 lakh annual income) cannot explain ₹5.18 lakh in a week.
- A dormant-account introducer who has not been re-verified is weak evidence of identity.
- The stated purpose ('Mohan's shop') is not supported by any document in the file.
- An abrupt closure-and-transfer request to another state immediately after the deposits, which is consistent with a mule or layering account.
Decision Do not process the closure and outward transfer as a routine request. Closure is not a compliance remedy; once funds move, the audit trail weakens and the bank may be helping layering. Place the account under enhanced monitoring and, subject to the bank's policy, mark a lien or freeze pending investigation, with documented approval. Permit closure only after compliance review, with proceeds handled as directed by the investigating authority, and after the STR process is complete. The request itself should be recorded as an additional red flag. If the branch is satisfied the account is a mule, report through the bank's fraud and cyber channels as well as the FIU-IND route.
2. How should the branch handle the 72% PEP match, and what reports are due? State what staff must not tell Mohan.
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Handling the match A 72% name match is a potential match, not a confirmed one. The branch should use secondary identifiers - father's name, address, photograph, date of birth, occupation and source of funds - to confirm or clear it. The one-year date-of-birth difference may be a data error or a different person, so document the comparison either way.
If the match is confirmed, apply enhanced due diligence: establish source of wealth and source of funds, obtain senior management approval for continuing the relationship, and monitor it more frequently. If it is not confirmed, record the rationale and retain the screening output.
Reporting
- The cash deposits do not cross the ₹10 lakh CTR threshold on their own, but structuring to stay below a threshold is itself suspicious.
- File a suspicious transaction report with FIU-IND within seven days of establishing suspicion, using the bank's principal officer route.
- Preserve the account-opening file, deposit slips, CCTV, and screening records.
Tipping off Staff must not tell Mohan that an STR has been filed, that he is being screened as a PEP, or that the account is under investigation. Tipping off is an offence under the PMLA. If he asks why the account is blocked, give a neutral operational reason and refer him to the branch's grievance channel; do not disclose compliance reasoning.
3. Identify the onboarding and monitoring failures and state three concrete fixes.
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Failures
- The introducer was a dormant customer and was not re-verified; an introducer's value depends on current, documented KYC.
- Occupation and income were accepted without corroboration, and the expected transaction profile was never set.
- No business address or shop was verified even though the account was presented as a business account.
- The risk categorisation was probably low, so the six cash deposits did not trigger an alert.
- Branch deposit targets were allowed to override onboarding diligence.
Fixes
- Require independent verification of business address and activity for any account declaring business income, and set an expected monthly cash turnover in the file.
- Build cash-deposit rules that flag repeated deposits just below reporting thresholds and multiple third-party depositors, not just aggregate value.
- Re-verify dormant introducers, separate sales targets from compliance sign-off, and train counter staff to escalate profile mismatches rather than process them.
These measures address the root cause: the branch treated a compliance check as a formality and let a target-driven incentive decide the risk rating.