Should a CTR be Filed for a Transaction Intended to Correct an Error?

Issue/Inquiry

The Bank’s customer had purchased a cashier's check for $7,500 payable to a business. The next business day, the customer returned to the branch office where he purchased the check and said he could not use it, so he wanted cash instead. The teller endorsed the check as “not used for purpose intended” and proceeded to cash the check for the customer, since the funds were originally from his account. Subsequently, the branch staff decided to correct the transaction by having the customer come back to the Bank with the cash, redeposit the funds into the account, and then cash out a check drawn on the account. On the same day, the customer had cashed another check that was also in the amount of $7,500. The cash reports now show that the customer withdrew $15,000 in cash in one business day and deposited $7,500 in cash. The Bank believes that, in reality, the customer only benefited from $7,500, since he was attempting to help the branch correct their mistake. Does a CTR still need to be filed since two separate checks were cashed by the same customer on the same business day?

Response Summary

Under the FinCEN aggregation rules, when either the cash-in or cash-out total more than $10,000, the filing of a CTR is required.  Debits must be added to debits and credits to credits. Since the deposit was a cash-in transaction, it cannot be aggregated with the cashing of the checks, and since it was less than $10,000, no CTR is required for it. The cashing of the checks were cash-out transactions which must be aggregated and treated as a single transaction. Since the total amount of the checks exceeds $10,000, a CTR must be filed for them. FinCEN’s CTR rules are not concerned with the purpose of a transaction, but only with whether it is a currency transaction and its amount.

Response Detail

Unfortunately, the Bank will have to file a CTR in this case.

Under FinCEN regulations, each financial institution shall file a report of each deposit, withdrawal, exchange of currency or other payment or transfer by, through, or to such financial institution which involves a transaction in currency of more than $10,000. 12 CFR §1010.311.

A “transaction” includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, certificate of deposit, or other monetary instrument, transfer, or delivery by, through, or to a financial institution, by whatever means affected. For the purpose of filing a CTR, the term “transaction in currency” means a transaction involving the physical transfer of currency from one person to another. 12 CFR §1010.100(bbb).

Multiple currency transactions are be treated as a single transaction if the financial institution has knowledge that they are by or on behalf of any person and result in either cash-in or cash-out totaling more than $10,000. This means that debits are added to debits and credits to credits. If cash debit or credit totals exceed $10,000 in a business day, a CTR is required. 12 CFR §1010.314; FinCEN, Commonly Asked Questions About FinCEN’s Currency Transaction Report (CTR), Q. 17.

In this case, the customer deposited $7,500 into his account, a check for $7,500 was drawn on the account, which was then cashed, and a second check for $7,500 was also cashed.

Each of the transactions was a transaction in currency, since each involved a physical transfer of currency from one person to another. The customer transferred $7,500 in currency to the Bank for a deposit, and the Bank transferred $15,000 to the customer when it cashed his checks. The deposit of the $7,500 in currency was a cash-in transaction. The cashing of the $7,500 checks were cash-out transactions. 31 CFR §103.22(b)(2)(ii)(G).

The deposit cannot be aggregated with the cashed checks, as this was a cash-in transaction and the cashed checks were cash-out transactions. Because the deposit was less than $10,000, no CTR has to be filed for it.

The cashed checks are both cash-out transactions and must be aggregated. Since they total $15,000, which is more than the $10,000 CTR threshold, a CTR must be filed for them.

While the cashing of the first $7,500 check was an entirely proper transaction for a limited purpose, the CTR rules are not concerned with the purpose of a transaction but whether it is a currency transaction and in what amount. When the currency transaction exceeds $10,000, the filing of a CTR is required regardless of the reasons for the transaction. FinCEN, A Guide to Understanding Currency Transaction Reports (CTR).

 

This entry was posted on Monday, March 28th, 2016 at 3:00 pm.