Structured Cash Deposits and an Offshore Remittance
An account opened four months ago for a hardware and building-supplies business has received six weekly cash deposits between J$380,000 and J$420,000, each made at a different branch, each just under the amount branch staff have been trained to treat as reportable. The funds have been used to buy listed blue-chip equities in three tranches. This week the client instructed the dealer to sell the entire position and remit the proceeds to an account in another jurisdiction in the name of a company that is not the account holder. Asked for source-of-funds documentation, the client supplied a one-page invoice with no company letterhead and became irritated, saying he had 'been banking in this town for thirty years'. The relationship manager says the client is well known and asks compliance to 'keep it moving' because the trades will generate J$310,000 in commission. The firm has no enhanced due-diligence note on file and the business registration is in a relative's name.
1. Identify the red flags and assess how they should change the firm's risk rating of the relationship.
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The pattern, not any single transaction, is the signal.
- Structuring. Six deposits clustered just below a training threshold, spread across branches, is the classic signature of deliberate avoidance. The fact that no individual deposit crossed a reporting threshold is not a defence - the pattern is the suspicion.
- Business consistency. A hardware retailer depositing roughly J$400,000 a week in cash should have sales records, purchase invoices and a bank statement trail. One undated invoice without letterhead is not that.
- Velocity and purpose. Cash in, equities bought, then a full liquidation within weeks, with proceeds to leave the jurisdiction. Investment is being used as a transit stage rather than as a purpose.
- Third-party beneficiary. Remitting to an overseas company that is not the account holder adds a layering dimension and requires identification of the beneficiary and its owners.
- Legal form. Business registration in a relative's name, with no beneficial ownership analysis, means the firm does not actually know who its customer is.
- Behaviour. Irritation at routine questions is not itself suspicious, but it is a factor when combined with the rest. Thirty years of local presence explains nothing about the source of this cash.
Risk rating should move to high, with enhanced due diligence and senior sign-off.
2. What must the firm do, and what must it not do, while the review is under way?
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Must do:
- Escalate immediately to the AML/CFT compliance officer or nominated officer; the relationship manager does not decide this.
- Complete enhanced due diligence: beneficial ownership of the account holder and of the overseas beneficiary, audited or bank-verified sales records, tax filings, and an explanation of why cash is used rather than banking proceeds.
- Consider whether the knowledge, suspicion or reasonable grounds for suspicion require a suspicious transaction report to the Financial Investigations Division, and file without waiting for the EDD to conclude if the threshold is met.
- Apply a risk-based decision on the relationship: restrict further cash deposits, restrict withdrawals or transfers, and document the decision and who took it.
- Keep records - the EDD file, the decision log, the report and the training record - for the statutory retention period.
Must not do:
- Tip off the client that a report has been made or is being considered, or signal the review through casual questioning.
- Let the J$310,000 of commission influence the assessment, or allow the relationship manager to approve continued activity.
- Treat 'well-known local client' as a substitute for evidence.
- Close the account in a hurry to make the problem someone else's; that is a recognised avoidance tactic.
3. How should the firm handle the pending sell-and-remit instruction while the review is open?
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Separate the two legs, because they carry different risk.
The sale is a domestic disposal of listed securities into a regulated market. Executing it does not, by itself, launder anything, but it converts an illiquid, traceable asset into cash and is a necessary step in the sequence. The firm can generally execute, but should do so on the client's instruction, at market, with the proceeds retained in the account rather than released.
The remittance is the higher-risk leg and should not be processed until the compliance officer is satisfied. The firm needs to identify the overseas beneficiary company, its beneficial owners and its relationship to the client, and to understand the commercial rationale for sending the proceeds to a third party abroad. If those questions cannot be answered, the remittance stays on hold and the firm should take advice on whether it may lawfully delay or decline, noting that deliberately slow-walking a transaction to avoid tipping off is itself a judgement that needs to be documented.
Governance: the hold decision should be made by the compliance officer, in writing, with the reasoning and the client notification that can be given without disclosure of any report. The relationship manager should not be the point of contact for that notification. If the client objects, the complaint should be logged and answered factually - the firm is entitled to decline to act until its customer due diligence is complete.