Currency Transaction Reports (CTRs)
Under the Bank Secrecy Act (BSA), (enacted to aid in identifying the source, volume, and movement of currency in and/or out of the United States or deposited in financial institutions), firms are required to file a CTR for any cash transactions over $10,000.
In order to identify potentially fraudulent activity, banks are also required to maintain records of any funds transferred in the amount of $3,000 and above. Many banks will use software that aids in discovering suspicious activity, especially in larger banks where thousands of transactions are performed daily.

In addition, these reports include structured transactions, where a number of small transactions totaling $10,000 or more have been made over a short period of time. This activity often occurs when an individual is attempting to avoid the $10,000 reporting requirement.

This information is reported on FinCEN Form 104. FinCEN itself is a bureau of the U.S Treasury and is the delegated administrator of the BSA.

Suspicious Activity Reporting
These reports, as required by the BSA, should be filed for:

  • Criminal violations involving insider abuse.
  • Criminal violations for $5,000+, when suspect is identified.
  • Criminal violations for $25,000+, even when no suspect is identified.
  • Transactions for $5,000+, if the bank or affiliate knows, suspects or has reason to suspect the transaction:
  • may involve potential money laundering, terrorism financing or other illegal activity,
  • is designed to evade the BSA,
  • has no apparent business or lawful purpose or seems odd when compared to the customer's normal activities, and there is no reasonable explanation after examining the facts.

Suspicious activities are often difficult to detect since they are designed to avoid detection. Some examples of suspicious activities include:

  • customers who are uninterested in investment products that offer lower fees and higher returns,
  • customers who supply inaccurate, false or suspicious information,
  • customers with known criminal backgrounds, who begin to conduct numerous transactions or
  • customers who wire funds into an account, then immediately request to redirect funds to another institution, city or country.

Compensation
As stated already, agents and/or advisers may not participate in percentage gains of an account except under certain circumstances:

  • Agents may participate in gains of an account, if the account is equally (dually) owned by the agent and client, and is approved by the broker-dealer. What's more, the agent must equally participate in any losses that occur.
     
  • Investment Advisers may not participate in "performance-based fees" unless the client is:
    • an institutional investor,
    • a private client with a minimum net worth of $2. million or
    • a private client with a minimum of $1,000,000 invested with the adviser.

Look Out!
Participating in performance fees is mentioned twice in the study guide, and is quite likely to appear on the exam.



Compliance and Custody of Client Funds

Related Articles
  1. Insights

    How The Patriot Act Works & Why Is It Important

    The USA Patriot Act gave the government more muscle to fight financial crime after the Sept. 11 terrorist attacks. Here's an overview.
  2. Small Business

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  3. Investing

    What's Anti-Money Laundering?

    Anti-money laundering involves the laws and regulations designed to prevent criminals from generating income through illegal activities.
  4. Managing Wealth

    Buying Luxury Property: How Private?

    A pilot program designed to cut back on money laundering in high-end residential real estate is bound to affect the transactions of cash buyers.
  5. Financial Advisor

    Question the Funds Picked By Your Financial Advisor

    Learn the importance of having a financial adviser whom you can trust and why questioning the funds he selects is part of that process.
  6. Taxes

    Switzerland's Declining Tax Haven Appeal

    Switzerland's tax haven allure is being threatened by efforts by the US and other governments to make Swiss banks give up their much-vaunted secrecy.
  7. Personal Finance

    Private Banking Vs. Wealth Management: Not Quite the Same

    Discover the various ways in which private banking and wealth management services coincide, as well as the significant differences between them.
  8. Insurance

    How to Become a Life Insurance Agent

    The pros and cons of becoming a life insurance agent, a field that can be hard to crack—but that can pay off big when you do.
  9. Investing

    How Real Estate Agents Get Paid

    Most real estate agents are paid a percentage of the property’s selling price, which is called a commission.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center