Financial Crime World

Cash Constitutes Proceeds of Crime: Banking Sector Must Take Action

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The banking sector has been urged to take a closer look at cash transactions and their potential links to money laundering (ML) and terrorist financing (TF). A recent directive highlights the importance of cash deposits and withdrawals, which may constitute proceeds of crime.

Thresholds and Querying

While there is no specific threshold for reporting suspicious cash transactions, banks are advised to use their knowledge of the customer’s activities to identify those deposits that should be queried. A single cash deposit can represent multiple sales, and traders selling goods listed in regulations may offer a wide range of products with varying prices.

  • Credit institutions are encouraged to consider setting thresholds for cash deposits and withdrawals, but this should be based on what is known about the customer’s activity.
  • The €10,000 threshold, while not mandatory, may serve as an indicator for non-trading customers that a given transaction or series of transactions needs to be flagged for additional querying.

Reporting Suspicious Transactions

When faced with a cash deposit or withdrawal that gives rise to suspicion of ML/TF, banks must decide whether to process the transaction and file a suspicious transaction report (STR) later or delay executing the customer’s instructions pending the filing of the STR. The decision will depend on various factors, including the way deposits and withdrawals are made.

Red Flags

A new annex has been released, outlining cash-related red flags that may indicate ML/TF. These include:

  • Significant cash deposits without justification
  • Multiple deposits in quick succession through different channels or locations
  • Deposits consisting predominantly of large denomination notes
  • Deposits followed by immediate withdrawals

In the case of cash withdrawals, red flags include:

  • Repeated withdrawals from different locations or through different means within a short period of time
  • Particularly large withdrawals that are unusual for the customer’s normal banking activity
  • Withdrawals made by third parties who may not be related to the customer
  • Withdrawals always accompanied by a third party when calling at the institution’s branch

Conclusion

The banking sector is reminded to adopt a risk-based approach to cash transactions and to query any deposits or withdrawals that raise suspicions of ML/TF. The use of cash-related red flags can help identify potential criminal activity and prevent financial crimes.