Letter: Understanding Bank Transaction Reporting in the U.S.

Dear SurvivalBlog Readers:
I have noticed over the last few weeks a couple of articles discussing banking and transaction reporting etc. I would recommend (if one is having trouble sleeping at night) that everyone who is interested read the audit manuals for the Bank Secrecy Act (BSA), which includes currency transaction reporting (CTR), suspicious activity reporting (SAR), and monetary instrument logs (MIL). Bank’s are required by law to perform these on all customers based on activity and the bank’s teller system analysis. Most people know about CTRs – deposit or withdraw more than $10,000 in cash – but they do not know about SARs or the monetary instrument tracking. Since I audit banks and consult on internal controls for a living, I thought I would discuss the monitoring and reporting process of each.

  • CTRs – Any time you withdraw $10,000 in cash from an account, or series of accounts, or deposit the same, a currency transaction report (CTR) is generated on you personally. The software I have always seen in practice tracks the customer and not the account. So if you have two checking accounts and a savings account with the same institution, any combination of deposits or withdrawals that total over $10,000 will be reported at the end of the day. Even if you go to different branches to withdraw or deposit the funds, it will be found and reported. Most people focus on the CTR process and are paranoid that all large transactions are being reported to any number of alphabet agencies. However, I can say from experience that the volume of CTRs is usually very large and they do no get reported directly to any law enforcement. They are stored, yes, but they are rarely looked at after their filing. Those who try to avoid these, though, are usually put on the next list. . .
  • SARs – A suspicious activity report (SAR) is one of the worst reports that you can be on at any financial institution. Those who try to avoid the CTR by structuring are always reported through a SAR. Large foreign wire transfers or checks usually earn a SAR, out of the ordinary cash payments on loans, or a large increase and/or variation in a high risk account will earn a SAR as well. By high risk I mean an out of state customer, a foreign national, a business account, a person who was hit on an OFAC or Chexsystem report, etc. SARs are reviewed by high level officers at the bank and these reports do go directly to law enforcement each time they are filed. They are not stored away or saved for a rainy day. If a SAR is filed then a FinCEN officer will see it. A SAR will also mark your account as high risk and you will be monitored for at least another 90 days, if not longer, with follow up SARs filed if the questionable behavior continues. At that point the bank may choose to close your account.
  • MILs – Monetary Instrument Logs (MILs) are kept on any monetary instruments purchased with cash. These are closely monitored as well since this is a common form of money laundering and sponsoring of illicit activities. All banks maintain a monetary instrument log. Any monetary instrument over $2,500 will be recorded here. Your name, Social Security or driver’s license number, account number, reason for purchase, and the instrument’s serial number will be recorded as well. These will be reviewed by the BSA Officer of the bank at least quarterly if not monthly. If something is out of place, a SAR will be filed. If the instrument is for over $10,000 a CTR will be filed.

In closing, I would say that it is preferable to have a CTR filed in place of a SAR. If you think you can structure items, you usually can’t. Banks pay a lot of money to have systems that literally do nothing but monitor patterns and transactions. Most will look at 15-30 days minimum for structuring and odd behavior. The big boys play with software that look through months and years of data. Structuring is not treated kindly at all and will earn you a SAR. Another bit of advice would be to divulge as little information as possible to any teller, bank employee, or other customers. Bank employees, from the president down to the new teller, are trained regularly on how to extract and watch for information for CTR and SAR transactions. The training is required by regulations, so even the one branch community bank does it. Don’t EVER mention that you are trying to avoid any reporting or regulation, or talk negatively about the government to bank employees. Both of these will almost always earn you an
automatic SAR or a review by the BSA Officer and committee. Showing a high level of knowledge of banking regulations could also possibly earn you a review by the BSA officer, or an upgrade to your account risk rating. Be pleasant and nice, but do not chat up the teller, your loan officer, or any one else. Even if another customer mentions that you have said something while in line to the teller, that could also get you on the short list. All of this sounds very intrusive and aggressive, but it is not the banks’ fault. Most of them hate doing it, but the federal regulators will fine them if it is discovered they are not reporting. The best way to avoid it is to continue as you normally would, be low profile, and don’t try to hastily get around the system. It is designed exactly for that reason.

Regards, – The Auditor