Cash Deposits Just Below the Reporting Line
At a mid-sized branch in Bhilwara, a clerk reviewing cash transactions notices that Shree Balaji Hardware, a proprietorship with a current account, has made 26 cash deposits between ₹4,50,000 and ₹4,90,000 each over the last three months, totalling ₹1.21 crore. Not one deposit crosses ₹10 lakh. The firm's stated business is retail hardware; its annual turnover declared at onboarding was ₹60 lakh. Asked about the source of the cash, the proprietor says, 'It is seasonal collection from contractors, I don't keep records of every bill.' The branch manager, who is ₹8 crore short of the branch's CASA target, says, 'He is a local businessman and a good customer; do not irritate him, and no report is needed since no deposit is above ₹10 lakh.' The same afternoon a walk-in customer arrives with ₹12,00,000 in cash, and the manager suggests making three receipts of ₹4,00,000 each so that 'the paperwork stays simple'.
1. Is the manager right that no report is needed because no single deposit crosses ₹10 lakh? Explain the aggregation rule and compute the position.
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The manager has confused 'no single receipt above ₹10 lakh' with the reporting rule.
- The Cash Transaction Report aggregates cash deposits (and separately, cash withdrawals) for one customer over one calendar month, at a threshold of ₹10 lakh and above. It is not a per-receipt threshold.
- The arithmetic: 26 deposits of ₹4.5-4.9 lakh over three months averages roughly ₹40 lakh a month - about four times the CTR threshold. A CTR is due for each of the three months, filed through the bank's Principal Officer to FIU-IND by the 15th of the following month.
- The pattern is itself reportable: amounts deliberately kept just under ₹4.9 lakh, uniform and repeated, with no receipt crossing the line. That is the classic signature of structuring, and structuring is a red flag whether or not each individual receipt is below the threshold.
- The turnover mismatch must be acted on: ₹1.21 crore in three months against a declared annual turnover of ₹60 lakh. The CDD record is now stale and the risk classification should move to high; 'I don't keep records of every bill' is not an adequate answer from a registered dealer at this cash volume.
So: CTR for all three months, a KYC refresh, and enhanced due diligence. Note fairly that hardware retail is a legitimately cash-heavy trade - that alone is not suspicion. The discipline is to judge the pattern, not the trade.
2. Should a Suspicious Transaction Report be filed? Give the reasoning, including the mitigating facts, and describe the process.
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Weighing the facts. (i) Cash-heavy trade - neutral. (ii) Twenty-six deposits of near-identical size just below ₹5 lakh - strongly suggestive of structuring. (iii) Cash volume four times the declared turnover - unexplained. (iv) No records and an evasive answer - an adverse factor. (v) No customer complaint, no adverse news, deposits made openly - a mitigating factor. On the totality, reasonable suspicion exists. The branch does not need proof of a predicate offence, only reasonable grounds to suspect.
Process:
- File an STR through the bank's Principal Officer/designated director to FIU-IND. There is no minimum monetary threshold for an STR; it is independent of the CTR, and both are filed.
- The designated officer decides and files. The branch does not file directly, and the customer is not told - tipping off is an offence.
- Do not freeze the account or stop operations on your own. Continue normal banking, strengthen due diligence, and keep the records.
- Document the decision and the reasons, whether the outcome is 'file' or 'do not file'. An unexplained non-filing is exactly what an inspection picks up.
- Keep monitoring: further deposits, sudden transfers abroad, or a request to close the account should trigger a fresh assessment.
The manager's CASA target is not a factor that may be weighed in this decision.
3. The manager wants a ₹12 lakh deposit split into three receipts of ₹4 lakh. Assess that instruction and state what you do.
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Refuse, and put the refusal on record.
Why it is wrong. Accepting ₹12,00,000 as three receipts 'to keep the paperwork simple' is not a paperwork choice; it is designing transactions to stay below a threshold. That is structuring, and knowingly assisting such an arrangement is a serious offence under the Prevention of Money Laundering Act, independent of what the customer intended. It is also pointless: CTR aggregation is by customer and by month, so three receipts to the same PAN in the same month are aggregated anyway.
What to do:
- Accept the cash as one transaction, with proper CDD and the source of funds recorded where the amount or pattern warrants it.
- Do not carry out the split, and do not pass it to a colleague to do.
- Write a contemporaneous note - date, time, who instructed what - and send it to the Principal Officer/compliance and, if needed, the whistle-blower channel.
- Do not confront the manager publicly; the note and the escalation are your protection and the bank's.
- Remember that the branch's CASA target is irrelevant to the decision. Target pressure is the most common cause of these instructions, and it is not a defence for anyone involved.