A Currency Transaction Report (CTR) is an anti-money laundering safeguard. Filed by financial institutions in cases of a single transaction in excess of $10,000 (or multiple transactions totaling $10,000 in a single day), the report captures customer and transaction details and passes them along to FinCEN. Should the customer attempt to evade triggering the report or rescind the transaction, the financial institution is required by law to file both the Currency Transaction Report and an accompanying Suspicious Activity Report (SAR).
As an amount, $10,000 falls right into the gap between institutional and individual finances. For banks or other large businesses, $10,000 is a drop in the bucket; such places may see hundreds of thousands or even millions of dollars in transactions daily. For an individual, on the other hand, ten grand is a hefty (if not unheard of) sum of money.
But it’s precisely because $10,000 sits on the outer edge of what most of us would consider “normal spending amounts” that the Bank Secrecy Act selected it as the monetary amount required to trigger the filing of a Currency Transaction Report (CTR). Any transaction of $10,000 or more (or even multiple transactions totaling $10,000 in a single day) will result in the bank capturing the customer’s information and including it in a CTR, which is filed and passed along to the Financial Crimes Enforcement Network (FinCEN).
But what does that actually mean, and why does it happen? Let’s dig into it.
CTRs are designed to help prevent money laundering. Think about it: there’s definitely something suspicious about an individual (not a business) walking around and depositing chunks of cash in excess of ten grand on a regular basis! That’s why the Bank Secrecy Act developed the CTR: it was created as a means by which banks could capture tax and customer information and pass it along to regulators.
Any individual looking to deposit or withdraw an amount greater than $10,000 will trigger the bank’s CTR process (regardless of whether the individual is a customer of that particular bank). It’s important to note that the bank is not required to tell the customer that a CTR is being filed unless the customer asks, at which point they are required to provide an explanation.
There’s a hidden catch for would-be money launderers here, however. If learning that a CTR is to be filed causes the customer to want to rescind their transaction, the bank will automatically be required to file a Suspicious Activity Report (SAR). Same goes for if the customer tries to lower the transaction threshold or break it up into multiple, smaller transactions. (This is a form of structuring called “smurfing.”)
Here’s a (non-exhaustive) list of some of the financial institutions required to file CTRs as part of anti-money laundering efforts.
Let’s break this out into two categories, starting with what kinds of penalties exist for individuals who want to try and evade the CTR requirement. As we’ve discussed, anyone trying to structure transactions or evade the $10,000 threshold will see their information put into a Suspicious Activity Report and passed along to Law Enforcement. Law Enforcement is then able to open an investigation, and the subject – if found guilty in a court of law – can face steep fines and/or prison-time.
For banks or other financial institutions who are found to have been negligent in filing CTRs, FinCEN is responsible for bringing forth an enforcement action which could include both civil penalties (i.e. fines) and a period of re-examination of unfiled or mis-filed CTRs. This type of enforcement action isn’t levied every time CTRs are filed late or incorrectly, but may be what’s required if a regulator determines that the problem is severe.
Yes indeedy. There are a few different institutions that are exempt from CTR filing requirements. These include:
Why? As we’ve discussed, these types of institutions operate on a different level from everyday people (or even small- to mid-sized businesses). Because they complete a huge number of transactions, in amounts often well above the $10,000 CTR threshold, they are exempted from regular CTR filing.
Structuring – the careful arrangement of deposits and withdrawals in order to obscure the source of funds – is one of the three stages of money laundering. Because a CTR is specifically designed to highlight the movement of funds that might be considered “out of the ordinary,” money launderers will often try to find ways to evade the 10k threshold. That’s structuring! Financial institutions have transaction monitoring systems that look to flag those transactions, and bank tellers are also trained to look for signs of money structuring in customer activity happening at branch locations.
The Currency Transaction Report (CTR) is an anti-money laundering tool designed as a first line of defense against suspicious and potentially criminal money movement. By creating a reporting “fence” at the $10,000 mark and requiring that anyone making these types of transactions submit identifying information, financial institutions and FinCEN work together to get a head start on tracking illegal money movement.
There are financial institutions that – due to their transaction volume and scope of operations – are exempted from the CTR requirement. But before you assume these institutions are an easy avenue for money laundering, remember that they are required to run and maintain a robust compliance program with strong anti-money laundering controls.
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