My Customer Is Laundering Money?Should We Close The Account?

INSTRUCTIONS DIFFER DEPENDING ON AGENCY
The banker attending the Bank Secrecy Act Seminar felt he had a legitimate problem, and asked the panel of experts for their help.

The panel was made up of a banking attorney and a representative each from the Department of Treasury, the Department of Justice, and the Internal Revenue Service.

The banker was invited to tell his story.

It seems he had a customer who he knew was laundering money. Every Monday, Wednesday, and Friday the customer came in with $9,000 in small bills and deposited them into his pizza shop account. Periodically, he wired the funds out.

Because of his suspicions, the banker even went so far as to "stake out" the pizza shop one full day on a Tuesday. Eight customers entered the shop all day. Next morning-another $9,000 in cash!

The banker filled out the Currency Transaction Report (CTR), checking "Suspicious Transaction" on the top line. Then, following the suggested guidelines on page three of the CTR, they called the Criminal Investigation Division of the Internal Revenue Service and reported the transactions and their suspicions. They then filled out a Criminal Referral Form and filed it with all the proper agencies.

AND THEN THEY WAITED?
They waited until six weeks had passed, and then called again. "We'll get around to it," they were told.

The waiting time stretched to six months.

THE QUESTION?
The pizza shop owner is still coming in three times a week, still depositing $9,000 in cash each time.

The banker's question?"Should we leave the account open, or should we close it?"

THE ANSWER??
The representative from the Department of Justice got to the microphone first. He advised the banker that if he didn't close the account, he was in great danger of being charged with aiding and abetting money laundering, and was subject to prosecution. He should have closed the account long before this, according to the panel expert from Justice.

"No way!", countered the agent from the Internal Revenue Service. "If you close the account, we'll charge you with obstruction of justice and impeding an investigation!"

After a few minutes of hot and heavy "discussion" between the members of the panel, the representative from the Treasury suggested that it might be a good idea if the banker got a letter from the IRS giving them permission to keep the account open. That suggestion prompted hearty laughter among the bankers present!

SUGGESTION MADE BY BANKERS
John Byrne, Senior Federal Legislative Counsel for the American Bankers Association (ABA) told us that a letter has been forwarded to the Federal Reserve System, the Comptroller of the Currency and the Office of National Drug Control Policy. This letter contains a suggested revision of the new Criminal Referral Form (CRF). This change is being recommended by the ABA as well as the Bank Administration Institute and a "Roundtable of Experts" on the Bank Secrecy Act.

The Criminal Referral Form is under study for revision by the Bank Fraud Working Group, which is seeking to create a uniform, effective means of reporting by all financial institutions of incidents of bank fraud, including money laundering.

The suggestions forwarded, if implemented, will allow bankers to report suspicious transactions with a clear understanding of what action they should take with regard to the account.

We'll keep you as up to date as possible on developments of the new CRF. In the meantime, it has been suggested that if you report a suspicious transaction, you should note on both the CTR and the CRF?"This account will remain open unless otherwise instructed."

This notation may not buy you complete "safe harbor", but will attest to the fact that you are aware of the problem of leaving the account open, and have at least addressed it.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 3, 4/91