Bank Secrecy Act (BSA) Regulations - Money Transfer Reports

Gregory J. Cook, EA, CPA   

Currency Exchange Record

Each currency exchanger must create and maintain a record of each exchange of currency in excess of $1,000. The currency exchange may be either domestic or foreign currency, or it may be both. Thus, a currency exchange record is required when:

*Currency-in greater than $1,000, or
*Currency-out greater than $1,000.

Example. A customer wishes to exchange $3,000 in Canadian dollars for its equivalent in U.S. dollars, or a customer wishes to exchange $1,500 in $20 bills for $1,500 in $100 bills.

In each case, the transaction must be recorded.

The requirement to record currency exchanges includes the following – the currency exchanger must:

*Record customer ID and information,
*Record transaction information,
*Retain the record for five years from the date of the transaction.

Reports That Can Help MSBs Identify Suspicious Transactions

The following list of reports can be used to look for possible money laundering activity in MSBs.

Cash-In and Cash-Out of Large Transaction Reports

Many MSBs prepare, or have systems that generate, reports of cash-in and cash-out. Often these reports include transactions that exceed a certain threshold. Many money transmitters, for example, have established identification requirements at levels below the $3,000 threshold. Such reports can help identify customers who may be structuring transactions to evade BSA reporting and recordkeeping requirements or who are engaging in other unusual activity.

Kiting Reports

Issuers of traveler’s checks and money orders and money transfer companies often prepare, or have systems that generate, reports that identify transactions that may involve kiting. Kiting is depositing and drawing checks between accounts at two or more banks and thereby taking advantage of the float – that is, the time it takes the bank of deposit to collect from the paying bank. Reports that indicate kiting may also disclose other unusual patterns of activity possibly associated with money laundering.

Money Transfer Reports

Money transfer companies prepare, or have systems that generate, daily transaction reports and other reports that identify different groupings of transfer activity processed through their systems (e.g., corridor reports showing all transfers from country A to country B in a specific time period). These reports can help identify unusual patterns that may suggest possible money laundering.

Depending on the type of report and the frequency, these reports can help identify unusual customer behavior. Such reports also may help identify unusual behavior of businesses serving as agents of money transfer companies.


$3,000 Instrument “Log”

Reports of cash sales of instruments between $3,000 - $10,000, inclusive, required by BSA regulations, can help MSBs identify possible currency structuring patterns. Recorded information can, for example, help identify customers who may be structuring transactions to evade the BSA reporting and recordkeeping requirements.

Clearance Records/Receipts

Issuers of money orders and traveler’s checks prepare, or have systems that generate, daily records of items that have been presented for payment against the issuer’s bank account. Many issuers have designed programs to identify unusual patterns of cleared instruments. Such reports can be extremely useful in the identification of items that may have been used for illicit purposes.

$3,000 Funds Transfer Records

These records, required by BSA regulations, can help money transmitters identify possible structuring patterns. Records of $3,000 or more in money transfers regardless of the method of payment may help identify customers who could be structuring transactions to evade BSA reporting and recordkeeping requirements.

Customer Activity Reports

Some MSBs use customer reward programs to encourage repeat use by customers. Reports generated to monitor individual customer responses or general customer activity can be useful in identifying unusual transactions or patterns of transactions.

Some Money Laundering Schemes

The following descriptions are intended to help MSBs identify activities that criminals use to launder money. They are also intended to reinforce the need for strict customer identification programs. Finally, although these examples are of landmark investigations that primarily involve banks, they provide lessons to be learned by MSBs as well.

Operation Polar Cap

Two banks reported suspicious activities related to changes in operations by customers. Those two reports and an analysis of CTRs by the U.S. Customs Service helped bring together a national investigation.

At one bank, an employee noticed that a customer, a jewelry broker, was making large cash deposits ($25 million over three months) that did not seem commensurate with his usual business. In addition to filing the CTRs required for cash transactions by this customer of more than $10,000 in a business day, one bank also notified the IRS Criminal Investigation Division (IRS-CID).

At the other bank, an observant employee became suspicious when a customer, who ran a grocery store and check cashing service, stopped taking cash back for the checks he deposited in the bank. This change led the banker to notify law enforcement authorities.

Together, these two suspicious banks helped uncover and disrupt an operation that had laundered about $1.2 billion over two years. More than 127 people were arrested, a foreign bank was indicted, and one ton of cocaine was seized. Numerous convictions resulted.