Financial institutions are often the point at which illegitimately earned money enters the financial system. This process is known as the placement stage and is the first of three stages of money laundering. As such, financial institutions are required to comply with anti-money laundering (AML) regulations and provide financial information to identify and discourage money laundering and financial crime.
Currency transaction reports (CTR) are among the most widely used and effective AML reporting tools. They play a crucial role in detecting and preventing money laundering, terrorist financing, and other illicit activities.
What Are Currency Transaction Reports (CTRs)?
CTRs are reports that financial institutions must file with the Financial Crimes Enforcement Network (FinCEN), detailing transactions involving cash or other currency exceeding $10,000. For example, whenever a bank customer deposits, withdraws, or transfers more than $10,000 in one day — or makes multiple transactions amounting to $10,000 — a bank must send a CTR to FinCEN.
The CTR form requires information such as the account number and verified customer identity information, which is one reason banks and financial services businesses are required to collect identifying information from customers in the first place.
Banks must also submit a CTR when a customer requests a transaction over the threshold but then changes their mind. For example, if they initially ask to deposit $11,000 but then decide to deposit $9,500 or abandon the transaction, the bank will submit a CTR and a Suspicious Activity Report (SAR).
It is illegal for customers to attempt to circumvent reporting by splitting the money into multiple transactions with amounts smaller than the reporting threshold. This practice is called structuring, and banks are obligated to file a SAR if they suspect a customer is attempting to structure their transactions in this way.
A Brief History
CTRs were first introduced in the Bank Secrecy Act of 1970 (BSA). Prior to the BSA, law enforcement agencies relied on banks to voluntarily report suspicious activity. They often declined to do so to protect the privacy of their customers.
The BSA introduced the concept of CTRs as a means to monitor large cash transactions, which were often associated with illegal activities such as drug trafficking, organized crime, and tax evasion. Initially, banks were only required to report transactions involving cash or negotiable instruments of more than $10,000. Over time, the scope of reportable transactions expanded to include additional types of businesses, institutions, and instruments.
As financial crimes evolved and became more sophisticated, so did the CTR requirements. Over the years, amendments and new regulations were introduced to strengthen CTRs and adapt to changing threats and technologies. For instance, the USA PATRIOT Act of 2001 expanded the definition of financial institutions subject to CTR reporting and introduced new anti-money laundering requirements.
CTRs were once paper forms that had to be filled in and sent to FinCEN. Today, electronic filing makes it easier for businesses to submit CTRs. FinCEN operates the Bank Secrecy Act E-Filing System, which streamlines the submission process.
For additional information on the history of compliance legislation and requirements view our timeline of key BSA/AML regulations.
Who Is Required to Submit Currency Transaction Reports?
A wide range of financial businesses are subject to CTR reporting obligations, including:
- Banks and credit unions must report currency transactions exceeding $10,000, whether they involve deposits, withdrawals, or the exchange of currency.
- Casinos and card clubs must file CTRs for cash transactions over $10,000 related to gaming activities, such as the purchase of chips or the redemption of winnings.
- Money service businesses (MSBs), which include money transmitters, check cashers, and currency exchanges, are required to report transactions involving the transfer or exchange of currency over $10,000.
Securities brokers and dealers that trade in stocks, bonds, and other securities must file CTRs for cash transactions exceeding the threshold, including the purchase or sale of securities.
However, while most large currency transactions must be reported, there are exceptions and exemptions that apply to specific transactions and customers, such as:
- Transactions between financial institutions: Currency transactions between banks or other financial institutions are generally exempt from CTR reporting.
- Transactions involving government entities: Transactions conducted by federal, state, or local government agencies or certain international organizations may be exempt from CTR requirements.
Established business relationships: Financial institutions may be allowed to exempt certain customers from CTR reporting if they have an established business relationship and meet specific criteria, such as being publicly traded or having a history of regular large currency transactions.
Going Beyond Currency Transaction Reports
CTRs are just one of the many AML obligations that banks, money services businesses, and other financial institutions must comply with. An AML compliance software, like Alessa, can streamline many of these obligatory processes. The Alessa regulatory reporting module is able to automate tedious reporting tasks, allowing for a greater volume of reports to be filed with greater accuracy.
Alessa provides a wide range of AML services to banks and credit unions, casinos, money services businesses, the FinTech industry and more, including:
- Identity verification and KYC
- Transaction monitoring
- Automated regulatory reporting for SARs, CTRs and STRs
- Watchlist and sanctions screening
Schedule a demo today to learn how Alessa can help your company streamline its AML and regulatory reporting processes.
