Money Laundering (Complex Frauds)

From 1996 to 1998, Broadway National Bank in New York allowed approximately $123 million in drug money to be laundered through its branches. Investigators documented many instances where customers came in with duffel bags full of cash to be deposited, often not even waiting around for it to be counted. One transaction alone involved $660,000 in cash.

$46 million was deposited by the same runner in about 250 separate transactions. Another $20 million was deposited by a different family. Bank tellers sometimes helped customers structure deposits to avoid the $10,000 reporting threshold established by the Bank Secrecy Act. Much of the money deposited was wired overseas within days of deposit. Broadway Bank did not file any Currency Transaction Reports or Suspicious Activity Reports in conjunction with these transactions.

The banks attorney stated that the bank was never aware that the money came from illegal sources, and that it never solicited any such business. Nonetheless, the bank was fined $4 million for its violations of the Bank Secrecy Act.

Requirements

1. The web site http://www.occ.treas.gov/handbook/bsa.pdf has a handbook that summarizes the Bank Secrecy Act (BSA) and other anti-money laundering legislation. Read the background section and then find and briefly describe the following terms:

Currency Transaction Report (CTR)

Structuring

Suspicious Activity Report (SAR)

2. The Bank Secrecy Act requires every bank to have internal controls and policies that ensure compliance with BSA reporting requirements. Assume that Broadway National Bank had such policies and controls in place. What are some of the conditions or attitudes that may have existed at Broadway to allow these kinds of activities to occur?

3. Consider your answer to question two. What opportunities and rationalizations might these conditions present to a dishonest Broadway employee who wanted to commit some other type of fraud (i.e. embezzlement)?