Expanded Examination Procedures For Persons and Entities
Objective. Assess the adequacy of the bank’s systems to manage the risks associated with cash-intensive businesses and entities, and management’s ability to implement effective due diligence, monitoring, and reporting systems.
Cash-intensive businesses and entities cover various industry sectors. Most of these businesses are conducting legitimate business; however, some aspects of these businesses may be susceptible to money laundering or terrorist financing. Common examples include, but are not limited to, the following:
- Convenience stores.
- Retail stores.
- Liquor stores.
- Cigarette distributors.
- Privately owned automated teller machines (ATM).
- Vending machine operators.
- Parking garages.
Some businesses and entities may be misused by money launderers to legitimize their illicit proceeds. For example, a criminal may own a cash-intensive business, such as a restaurant, and use it to launder currency from illicit criminal activities. The restaurant's currency deposits with its bank do not, on the surface, appear unusual because the business is legitimately a cash-generating entity. However, the volume of currency in a restaurant used to launder money will most likely be higher in comparison with similar restaurants in the area. The nature of cash-intensive businesses and the difficulty in identifying unusual activity may cause these businesses to be considered higher risk.
When establishing and maintaining relationships with cash-intensive businesses, banks should establish policies, procedures, and processes to identify higher-risk relationships; assess AML risks; complete due diligence at account opening and periodically throughout the relationship; and include such relationships in appropriate monitoring for unusual or suspicious activity. At the time of account opening, the bank should have an understanding of the customer's business operations; the intended use of the account; including anticipated transaction volume, products, and services used; and the geographic locations involved in the relationship.
When conducting a risk assessment of cash-intensive businesses, banks should direct their resources to those accounts that pose the greatest risk of money laundering or terrorist financing. The following factors may be used to identify the risks:
- Purpose of the account.
- Volume, frequency, and nature of currency transactions.
- Customer history (e.g., length of relationship, CTR filings,300As discussed in the core overview section, "Currency Transaction Reporting Exemptions," page 86, certain entities are ineligible for currency transaction reporting exemptions as a non-listed business. and SAR filings).
- Primary business activity, products, and services offered.
- Business or business structure.
- Geographic locations and jurisdictions of operations.
- Availability of information and cooperation of the business in providing information.
For those customers deemed to be particularly higher risk, bank management may consider implementing sound practices, such as periodic on-site visits, interviews with the business’s management, or closer reviews of transactional activity.
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