Further Action for Increased Cash Deposits by a Tour Guide
Question
Historically, a tour guide has made monthly cash deposits averaging $10,000. Over the past three months, the monthly deposits have averaged $100,000. When the financial institution questions the increased deposits, the tour guide explains that there have been numerous conventions in town so business has increased substantially.
Which further action(s) should the financial institution take?
Answers
Explanations
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A. B. C. D.C
The financial institution has identified a significant change in the tour guide's transactional behavior, as evidenced by the average monthly cash deposits increasing from $10,000 to $100,000 over the past three months. This raises concerns about potential money laundering or other illicit activities.
In response to this situation, the financial institution should take appropriate actions to mitigate the potential risks. The correct answer is C - Perform further investigation, if appropriate report the activity to the authorities and consider terminating the relationship.
Performing further investigation means that the financial institution should gather additional information and scrutinize the transactional behavior of the tour guide to determine if there are any red flags indicating potential money laundering or other illicit activities. This investigation may involve reviewing transactional data and conducting due diligence on the tour guide and their business activities.
If the investigation reveals suspicious or unusual activity, the financial institution may be required to report this activity to the authorities, as per regulatory requirements. Reporting may be done through filing a suspicious activity report (SAR) with the appropriate regulatory agency.
Additionally, the financial institution should consider terminating the relationship with the tour guide if the investigation reveals significant concerns or risks. This decision should be made after considering all relevant factors, including the findings of the investigation, the financial institution's risk appetite, and applicable legal and regulatory requirements.
Option A - Immediately terminate the relationship is not the correct answer, as it is premature to terminate the relationship without conducting a proper investigation.
Option B - Schedule a periodic review of activity is also not the correct answer, as the situation requires an immediate and thorough investigation given the significant increase in transactional behavior.
Option D - Perform further investigation, if appropriate report the activity to the authorities and place a limit on future transactions is not the best answer as placing a limit on future transactions is not enough to mitigate the risks of money laundering or other illicit activities.
