A real estate agency receives multiple cash deposits totaling $18,000 from the same client over three separate transactions within two weeks. Under AML/CFT requirements, how should this be treated?
Correct Answer
B) As possible structuring that needs enhanced due diligence and may need a report
Several cash deposits from the same client in a short period, each below the $10,000 prescribed transaction reporting threshold, suggest structuring to avoid reporting. That unusual pattern calls for enhanced due diligence, and if the agency forms a suspicion it must file a suspicious activity report with the Financial Intelligence Unit.
Why This Is the Correct Answer
Several cash deposits in a short period, each below the $10,000 prescribed transaction reporting threshold, suggest structuring to avoid reporting. That is an unusual pattern calling for enhanced due diligence (s 22(1)(c)), and if the agency forms a suspicion it must file a suspicious activity report within three working days (s 40).
Why the Other Options Are Wrong
Option A: As separate deposits each below the $10,000 threshold, so only standard checks apply
Looking at each deposit alone misses the point: repeated cash deposits just under a threshold are a classic structuring indicator.
Option C: As normal business activity from a known client, requiring no special action
Repeated cash deposits in a short period from one client are a red flag, not routine, whatever the relationship.
Option D: As needing enhanced due diligence only once the running total exceeds $25,000
There is no $25,000 trigger; the pattern itself calls for closer scrutiny and consideration of a suspicious activity report.
Deep Analysis of This Compliance Question
Structuring (sometimes called smurfing) is splitting cash into amounts below a reporting threshold. Each deposit here looks unremarkable; the pattern does not. The AML/CFT regime expects reporting entities to look at behaviour across transactions, so the question is not whether any single deposit crossed a line but whether the pattern has an innocent explanation. If it does not, the agency reports.
Background Knowledge for Compliance
Under the AML/CFT Act 2009, a physical cash transaction of $10,000 or more is a prescribed transaction that must be reported to the Financial Intelligence Unit (s 48A). Section 22(1)(c) requires enhanced due diligence for complex or unusual transactions or patterns with no apparent lawful purpose, and section 40 requires suspicious activity reports within three working days.
Memory Technique
Remember PATTERN: P-attern recognition over individual amounts, A-lert for multiple transactions, T-iming matters (short timeframes), T-otal amounts that seem structured, E-nhanced due diligence required, R-eport suspicious activity, N-ever ignore red flags. Think of a detective looking for patterns in criminal behavior rather than just counting individual incidents.
When one client makes several cash payments in a short time, think PATTERN: judge the series, not each deposit, and ask whether it is built to stay under $10,000.
Exam Tip for Compliance
Several cash payments just under $10,000 from one client suggest structuring: enhanced due diligence, and a report if suspicion forms.
Real World Application in Compliance
A buyer pays three cash deposits of $5,500, $6,200 and $6,300 over two weeks. None reaches $10,000, but together they look designed to avoid a prescribed transaction report. The agency asks about the source of the cash; the answers do not add up, so it files a suspicious activity report.
Common Mistakes to Avoid on Compliance Questions
- •Treating each transaction separately without considering patterns
- •Assuming compliance if individual amounts are below thresholds
- •Failing to recognize structuring or smurfing behavior
Related Topics & Key Terms
Key Terms:
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- → An international client buying a $2.8 million commercial property provides a copy of their overseas passport but refuses any further identity checks or information, claiming diplomatic immunity. How should the agent proceed under AML/CFT requirements?
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