Bob Jones, president of ACME bank, has had a banking relationship with Linda O'Reilly, a local real estate agent for several years. Ms. O'Reilly keeps most of her deposit accounts with ACME and also has had several personal loans there. Over a three-month time period, Ms. O'Reilly consistently (two or three times a week) brings to the bank a series of money orders in amounts ranging from $7,000 to $15,000, made payable to her in denominations of $1,000, and asks the teller to take them and issue one cashier's check payable to her. After this activity has continued for three months, Mr. Jones notices the frequency of cashier's checks issued to Ms. O'Reilly on a management report. It catches his attention because he does not know why Ms. O'Reilly would need this number of cashier's checks.
On inquiry, the head teller explains the weekly transactions. Which of the following statements best describes Mr. Jones's responsibility?
Click on the arrows to vote for the correct answer
A. B. C. D.C
The scenario presented involves Linda O'Reilly, a real estate agent who regularly deposits money orders in denominations ranging from $7,000 to $15,000 with ACME bank and requests that the teller issue a cashier's check to her in return. This activity has been going on for three months, and the bank president, Bob Jones, notices it on a management report. As a result, the question is about Mr. Jones's responsibilities.
The Bank Secrecy Act (BSA) requires financial institutions to report transactions that may be suspicious or indicative of money laundering or other criminal activities. These reports include Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs).
A CTR must be filed for any cash transaction over $10,000, but it can also be filed for transactions that appear to be structured to avoid the $10,000 threshold. Structuring refers to breaking up a large transaction into smaller amounts to avoid triggering reporting requirements.
In contrast, a SAR is filed when a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activities or is intended to conceal or disguise the nature, location, source, ownership, or control of the funds.
Based on the information provided in the scenario, there is no clear indication that Ms. O'Reilly is attempting to evade the BSA currency transaction reporting requirements. The transactions are not structured to avoid the $10,000 threshold, and the money orders are not cash.
Furthermore, there is no direct evidence of illegal activity or money laundering. However, the activity is suspicious and may warrant further investigation.
Therefore, the best course of action for Mr. Jones would be to inquire with Ms. O'Reilly about the nature of her transactions and why she needs a cashier's check in return. Based on her responses, he can then decide whether to file a SAR. It is essential to note that Mr. Jones has a responsibility to monitor and report suspicious activity, even if he has a long-standing relationship with the customer.
Option A, which suggests immediately filing a SAR with no further inquiry, may not be appropriate as there is no direct evidence of illegal activity or money laundering.
Option B, which suggests immediately filing a CTR, is also not appropriate as the transactions are not cash transactions.
Option D, which suggests no action is necessary, is not appropriate either, as suspicious activity should be investigated and, if necessary, reported to the appropriate authorities.
Therefore, option C, which suggests inquiry and further investigation before deciding whether to file a SAR, is the most appropriate answer in this scenario.