The Structuring Pattern at Riverside Branch
Riverside branch of a mid-sized commercial bank. Meridian Traders has banked there for 12 years, averaging USD 180,000 monthly turnover from cash-heavy retail sales. Over six weeks it made 14 cash deposits, each between USD 9,200 and USD 9,700, always by the same two employees, and added a new signatory who is not on the commercial register. The relationship manager's bonus depends on deposit growth and tells you, "This is a 12-year client, do not create friction." The branch manager agrees. Source-of-funds was last refreshed three years ago; the customer says suppliers prefer cash. The bank's reporting threshold is USD 10,000. A monitoring alert has landed on your desk because the deposits cluster just below it.
1. Does this pattern require a suspicious transaction report? Identify the indicators and explain what must happen regardless of the relationship's value.
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Yes, suspicion is engaged, and a report is likely required.
Indicators, read together rather than individually:
- 14 deposits in six weeks, all between USD 9,200 and USD 9,700 - clustering just below a USD 10,000 threshold is the classic signature of structuring, even when no single deposit breaches it.
- Same two staff making every deposit suggests deliberate control of who faces the teller.
- A new signatory absent from the commercial register is an unexplained ownership/control change.
- Stale CDD: source of funds last refreshed three years ago, while the business is cash-intensive.
- A stated reason ("suppliers prefer cash") that does not explain the uniform amount and frequency.
A 12-year relationship is not a defence. Longevity lowers baseline risk; it does not neutralise a transaction pattern. The decision to report belongs to the MLRO/compliance, not the branch or the RM.
Operationally: raise an internal suspicious activity report immediately, preserve the deposit records and CCTV, do not discuss the report with the customer (tipping-off), and continue normal monitoring without tipping the client off. Whether to exit the relationship is a separate, documented compliance decision.
2. How do you handle the pressure from the RM and branch manager, and what do you document?
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Separate the commercial question from the control question. The RM's bonus and the branch's deposit target are not relevant factors in a suspicion assessment; allowing them into the file is itself a finding.
Practical steps:
- Put the escalation in writing the same day, addressed to the MLRO, copying the branch manager so there is no informal "quiet word" defence later.
- Record the interaction with the RM and branch manager - date, what was said, who said it - factually, not accusatorially.
- State explicitly that the report is being made notwithstanding the relationship value and that no customer contact will occur.
- If the branch manager attempts to block escalation, use the whistleblowing route.
Document: the alert, the deposit schedule, the CDD gap, the signatory discrepancy, the escalation timestamps and the MLRO's decision. A defensible file shows the analyst identified the pattern, escalated promptly, and did not let revenue considerations alter the outcome. Regulators consistently treat "we knew but the client was valuable" as an aggravating factor.
3. What customer due diligence steps do you take, and what if the customer refuses to provide ownership and source-of-funds information?
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CDD refresh should cover:
- Beneficial ownership - who ultimately owns and controls Meridian Traders, and why the new signatory is not on the register.
- Source of funds and source of wealth - evidence for the cash, not an assertion.
- Purpose and expected activity - expected cash volumes and frequency, so future deviations can be measured.
- Nature of the business - why a retail business receives this volume of physical cash.
If the customer refuses or gives evasive answers, that is itself a risk factor. The bank cannot simply keep the account on old CDD. Options, in escalating order: request again in writing with a deadline; restrict the account (no new high-risk activity); and, if the information is not forthcoming, exit the relationship in line with policy and consider a suspicious activity report for the refusal combined with the structuring pattern.
Key judgement: refusal to explain source of funds does not by itself prove criminality, but it removes the bank's ability to justify the relationship. Document the refusal, the decision and the exit timetable.