Partner in Crime: A CTR Refresher
One is the loneliest number. That’s why sometimes criminals team up and break the law with a partner. There are several famous criminal duos throughout U.S. history, like Butch Cassidy and the Sundance Kid, Bonnie and Clyde, or Walter White and Jesse Pinkman in Breaking Bad (okay, that last pair is fictional). It’s possible that your credit union may encounter joint account owners that staff believe are working together to engage in illegal financial activity. How should credit unions handle Currency Transaction Report (CTR) requirements in such situations?
Let’s examine some CTR basics. Section 1010.311 of the FinCEN regulations requires a credit union to file a CTR for each “deposit, withdrawal, exchange of currency or other payment or transfer” which involve more than $10,000 in cash. Section 1010.313 describes when a credit union should aggregate multiple transactions together, including transactions conducted by different people. According to that regulation, cash transactions can be treated as a single transaction if they were made in a single business day and were made “by or on behalf of” the same person. Additionally, FinCEN has noted in a FAQ regarding CTRs that credit unions should look at the total of withdrawals or deposits separately and should not offset one category against the other. The FAQ discusses CTRs for joint accounts in questions 23 and 24:
Question 23 in the FAQ linked above addresses deposits made into a joint account, and states “[w]hen a deposit is made into a joint account, the deposit is presumed to be made on the behalf of all account holders because all account holders have potential access to the account balance…” (emphasis added). Let’s take the example of a married couple with a joint share account. This would mean that cash deposits by the wife may be presumed to also be “on behalf of” the husband, and vice versa. This can be helpful for aggregation purposes when cash deposits are made by both spouses. For example, if the wife deposits $6,000 in the morning, and then the husband deposits $5,000 in the afternoon on the same day, section 1010.313 would require those transactions to be aggregated together because they are “by or on behalf of” each spouse. The total would be $11,000, thus requiring the credit union to file a CTR.
The answer is less clear-cut for withdrawals. Question 24 of the FAQ provides a hypothetical in which a husband withdraws $12,000 but his wife is not present during the transaction. FinCEN states:
“Since John Smith made a withdrawal from the joint account in excess of $10,000, then the financial institution would list Jane Smith’s information only if it has knowledge that the transaction was also being conducted on her behalf. If the financial institution does not have knowledge that the withdrawal was conducted on behalf of Jane Smith, then it would neither be required to nor prohibited from listing Jane Smith...”
While deposits are presumed to be made on behalf of all owners of the account, that is not true for withdrawals. Let’s go back to our example of the married couple – say the wife withdraws $6,000 in cash from the joint account in the morning, and later that same day the husband withdraws another $5,000 in cash. Question 24 does not directly address this scenario, but does appear to state section 1010.313 would not require these withdrawals to be aggregated together unless the credit union had knowledge that the wife’s withdrawal was conducted on behalf of the husband, or vice versa. The credit union could possibly gain knowledge that a transaction is on behalf of the other spouse based on a conversation with the member making the withdrawal, or perhaps if the other spouse is seen waiting nearby or in the car outside the branch. Additionally, the FAQ indicates that a credit union may voluntarily file a CTR even when FinCEN regulations do not require filing, and that a credit union would not be prohibited from including the absent spouse on a CTR. Thus, whether to file a CTR for separate withdrawals by multiple account holders in a single day when the credit union does not have knowledge that the withdrawals were "on behalf" of the other account holders may be addressed in the credit union's CTR procedures.
Regarding the process of actually filling out the CTR, question 18 of the FAQ notes that a credit union should check the “multiple transactions” box (item 3) on the CTR when there are multiple cash-in or cash-out transactions in any amount conducted by or for a person listed in Part 1 of the CTR. Additionally, a credit union may need to check the “aggregate transactions” box, depending on the factual circumstances. Finally, the FAQ quoted above notes that multiple Part 1s of the CTR form may need to be filled out depending on the number of people involved and their roles in the transaction(s). See this article in NAFCU’s Compliance Monitor (available to NAFCU members only) for an in-depth look at filling out the CTR form.
Finally, additional reporting requirements may apply. For example, section 748.1(c) of NCUA regulations requires a federally-insured credit union to file a Suspicious Activity Report (SAR) for transactions aggregating $5,000 or more when the transaction is designed to evade BSA regulations, such as when transactions are “structured” to avoid the CTR filing threshold. In the examples provided above, a SAR could be required because a credit union could determine that the multiple transactions below the CTR threshold were "structuring" and the transactions totaled more than $5,000.
For more information on BSA requirements, check out our other Compliance Blog posts on BSA topics.
About the Author
Nick St. John, was named regulatory compliance counsel in March 2020. In this role, Nick helps credit unions with a variety of compliance issues.