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. Investing

    Citigroup Settles Money Laundering Case for $97 Mln

    Per a settlement with the U.S. Department of Justice, Citigroup has admitted it violated the Bank Secrecy Act, but it will not be prosecuted.
  2. Investing

    HSBC's Money Laundering Scandal

    .
  3. Personal Finance

    Private banking versus wealth management

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

    Understanding Money Laundering

    The process of creating the appearance that large amounts of money obtained from serious crimes actually originated from a legitimate source.
  5. Insurance

    8 Qualities That Make A Good Insurance Agent

    Insurance agents must possess each of the following qualities in order to be successful.
  6. Investing

    Would You Make A Good Real Estate Broker?

    How to tell if you'd be good in this field. It is a common second career for many people, but isn't a good match for everyone.
  7. Investing

    Do You Need A Real Estate Agent?

    There's no guarantee that realtors will act in your best interest, but it may be worth hiring one anyway.
  8. Investing

    What Real Estate Agents Don't Want You To Know

    While they can be instrumental in helping you buy or sell a home, real estate agents may ulterior motives.
  9. Investing

    How Real Estate Agent and Broker Fees Work

    Buying or selling a home? What you need to know about real estate agent and broker fees.
  10. Insights

    Tax Implications of Opening a Foreign Bank Account

    Learn about the tax implications of opening a foreign bank account, including accounts that generate earned or unearned income from overseas activity.
Frequently Asked Questions
  1. What's The Put-Call Ratio and Why It's Important?

    The put-call ratio is used by investors to gauge market sentiment and as a contrarian indicator. The ratio measures the number ...
  2. Why did the New York Stock Exchange report prices in fractions before it switched to decimal reporting?

    Before April 9, 2001, prices on the New York Stock Exchange were denominated in fractions - in one-sixteenths to be exact.
  3. Which Transactions Affect Retained Earnings?

    Retained earnings is the cumulative total of earnings or net income that have yet to be paid to shareholders. Retained earnings ...
  4. What is the difference between derivatives and options?

    A derivative is a financial contract that gets its value from an underlying asset. Options offer one type of common derivative.
Trading Center