A real estate agent receives a $50,000 deposit from a buyer who requests to pay in cash using multiple $9,500 installments over several days. What should the agent do under AML requirements?
Correct Answer
C) Treat the pattern as suspicious and consider a suspicious activity report
Paying $50,000 as $9,500 cash instalments keeps each payment just under the $10,000 prescribed transaction reporting threshold, a classic structuring pattern. The agent should treat it as suspicious and, once a suspicion is formed, file a suspicious activity report with the Financial Intelligence Unit within three working days.
Why This Is the Correct Answer
Instalments of $9,500 sit just under the $10,000 prescribed transaction reporting threshold (reg 5AC, AML/CFT (Definitions) Regulations 2011), a classic structuring pattern. The agency should treat it as suspicious and file a suspicious activity report within three working days of forming the suspicion (s 40 of the AML/CFT Act 2009).
Why the Other Options Are Wrong
Option A: Accept the payments, because each instalment is below the $10,000 threshold
Splitting a large sum into instalments just under the threshold is structuring, a textbook red flag, not a reason to relax.
Option B: Refuse all cash payments over $5,000, as the AML/CFT Act requires
The Act sets no $5,000 cash ban for real estate agents; the response is due diligence and reporting, not a statutory refusal rule.
Option D: Accept the instalments but report the combined total to the FIU only once
A single combined report misses the point: structuring is itself a ground for suspicion, and a suspicious activity report is due within three working days of forming it.
Deep Analysis of This Compliance Question
Structuring is designed to avoid automatic reporting, so a pattern of payments just under a threshold is more worrying than a single large payment, not less. The AML/CFT regime expects reporting entities to judge behaviour across transactions. Blanket refusal of cash is not what the Act requires, and a single combined report is not a recognised substitute for a suspicious activity report.
Background Knowledge for Compliance
Under the AML/CFT Act 2009, a physical cash transaction of $10,000 or more through a reporting entity must be reported as a prescribed transaction (s 48A). Section 22(1)(c) requires enhanced due diligence for unusual patterns of transactions with no apparent lawful purpose, and section 40 requires a suspicious activity report within three working days of forming a suspicion. The 2017 amendments replaced 'suspicious transaction report' with 'suspicious activity report'.
Memory Technique
Remember SPLIT: Suspicious Patterns Lead to Investigation and Tracking. When you see payments being SPLIT into smaller amounts over time, especially just below reporting thresholds, this triggers the warning system. Think of a criminal trying to SPLIT their tracks to avoid detection - this requires enhanced investigation.
When payments are split into amounts just under $10,000, think SPLIT: the pattern is the red flag, so the answer involves enhanced due diligence and a suspicious activity report.
Exam Tip for Compliance
Instalments just under $10,000 point to structuring: enhanced due diligence and a suspicious activity report, not acceptance or a blanket ban.
Real World Application in Compliance
A buyer offers to pay a $50,000 deposit in cash, in daily instalments of $9,500. The agent recognises the pattern, asks for evidence of where the cash came from, gets evasive answers, and the agency's compliance officer files a suspicious activity report within three working days.
Common Mistakes to Avoid on Compliance Questions
- •Focusing only on individual payment amounts rather than patterns
- •Assuming cash payments under $10,000 are automatically acceptable
- •Failing to recognize structuring as a red flag requiring action
Related Topics & Key Terms
Key Terms:
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