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FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism

During ongoing monitoring, a bank notes that a small retail business account, historically showing monthly cash deposits near USD 8,000, suddenly receives many cash deposits just under the USD 10,000 reporting threshold from several branches. What is the most appropriate response under a risk-based monitoring framework?

The activity should be escalated for investigation against the customer's known profile, and a suspicious transaction report filed if suspicion remains. Repeated deposits just below the reporting threshold suggest structuring, so being under the limit is a red flag, and waiting for a periodic review is too slow.

  1. AClose the account immediately without any internal reporting, to avoid tipping off
  2. BIgnore the activity because each deposit is below the threshold
  3. CRaise the alert for investigation against the customer profile, and file a suspicious transaction report if suspicion remains after reviewCorrect
  4. DWait for the annual KYC refresh before taking any action

Explanation

The pattern suggests structuring and departs from the expected profile. Monitoring should escalate it for review and, if suspicion is not resolved, trigger an STR. Being under the threshold is itself a red flag, and waiting for an annual refresh delays reporting.

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