James Walker DBA Walker Enterprises has been a customer of the bank for one month. The company told the bank that it would regularly make deposits in excess of $10,000 because it operates several laundromats in the city. The bank performed a background check on the company before opening the account. For its first 30 days, the company made 12 large cash deposits. Can the bank exempt this company now? Why or why not?
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A. B. C. D.D
The correct answer to this question is D. Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.
As per the Bank Secrecy Act (BSA), financial institutions are required to implement an anti-money laundering (AML) program that includes policies, procedures, and controls to detect and prevent money laundering and other illicit activities. One of the key components of an effective AML program is Customer Due Diligence (CDD). CDD requires banks to identify and verify the identity of their customers, assess the risks associated with their customers, and monitor their transactions for suspicious activity.
In this scenario, the bank conducted a background check on the customer, Walker Enterprises, before opening the account, which is a form of CDD. The company also informed the bank that it would regularly make deposits in excess of $10,000 due to its business of operating several laundromats in the city. This information indicates that the customer's large cash deposits are legitimate, which is further supported by the fact that the company has made 12 large cash deposits within the first 30 days of the account opening.
The fact that the customer is a sole proprietorship (option A) or has not maintained an account at the bank for 12 months (option B) are not relevant factors for determining whether the bank can exempt this customer from further monitoring. Similarly, option C (the customer operates an ineligible business) does not seem to apply here since operating laundromats is not inherently an ineligible business for banking purposes.
In conclusion, since the bank conducted due diligence on the customer and determined that its large cash deposits are legitimate, it is reasonable to exempt this customer from further monitoring at this time. However, the bank should continue to monitor the customer's account for suspicious activity in accordance with its AML program and the BSA regulations.