There is a lot of information and reports available on best practices for Suspicious Transaction/Activity Reports (STRs/SARs), as they are an important part of a company’s compliance and AML/CFT procedures.
However, financial institutions and other obliged entities are also required to complete Cash Transaction Reports (CTRs) as part of their compliance procedures. And there is still a lack of analysis on what are the best practices for CTRs and how to automate these processes.
Definition of CTR
CTR stands for Cash Transaction Report. It is a report that financial institutions, such as banks, are required to submit to the relevant regulatory authorities, such as the local Finance intelligence unit (FIU) or similar organizations. In other words, CTRs are part of anti-money laundering (AML) and countering the financing of terrorism (CTF) efforts.
A CTR is usually generated for every cash transaction above a certain threshold. The threshold can vary from country to country but is usually set at a relatively high level to focus on larger transactions.
For example, in the United States the threshold is set at USD 10,000 and in a large list of European countries it is set at EUR 10,000 per day with some exceptions of EUR 15,000 per day. If a cash transaction exceeds this amount per day, the financial institution must file a CTR.
The purpose of CTRs is to monitor and detect potentially suspicious or illegal activity, such as money laundering, tax evasion or terrorist financing. The report contains information about the customer making the transaction, such as their name, address, social security number (or equivalent), and details of the transaction, such as the amount, date and type of transaction.
Financial institutions are required by law to file CTRs as part of their compliance with AML and CTF regulations. Failure to report, or deliberately structuring transactions to avoid the reporting threshold, can result in penalties and legal consequences for both the financial institution and the individuals involved.
Critical procedure for VASPs
The CTR issue is particularly relevant for virtual (crypto) asset service providers (VASPs/CASPs), as they deal with large inflows of funds later converted into crypto assets. Each country has its own procedures as to which institution VASPs/CASPs are required to submit a CTR.
In most countries, they are required to submit CTRs to the FIU. For example, in Lithuania, which is one of Europe’s fintech hubs, virtual currency exchange operators are required to report to the FIU customer identification data and information on virtual currency exchange operations or virtual currency transactions carried out, if the value of such monetary operation or transaction is EUR 15,000 or more, or an equivalent amount in foreign or virtual currency, whether the transaction is carried out in a single monetary operation or in several operations that appear to be linked.
The FIU has clarified that multiple linked monetary transactions means multiple daily virtual currency exchange operations or transactions in virtual currency where the total value of the operations and transactions in funds is EUR 15 000 or more, or an equivalent amount in foreign or virtual currency.
Solution that saves resources
In order to meet these requirements, VASPs/CASPs should allocate adequate resources to the IT and AML/CFT teams. Considering the volume of transactions, the company deals with, it may take up to 2 separate people just to complete the CTRs. And that means up to 320 hours of work per month.
To assist VASPs/CASPs in complying with the regulatory requirements for CTR filing, AMLYZE has introduced an automated CTR module, which complements a list of our main modules such as Transaction Monitoring Module (real-time and retrospective), Risk Assessment Module, Investigations Module or Screening Module (for sanctions, PEPs, negative media screening).
Our CTR module monitors 5 events: Money (FIAT) deposit, Money (FIAT) withdrawal, Crypto to Money (FIAT) exchange, Money (FIAT) to Crypto exchange and Crypto to Crypto exchange. After reaching a defined limit (15,000 euros), the system aggregates all transaction data and generates a report (CTR) in .xml format, ready to be provided to the FIU.
The module allows reports to be reviewed and marks the date of the submission. Overdue reports are highlighted. The CTR module is now in a further development stage to allow automatic reporting to the FIU (system to system).
Andrius Normantas CEO and Co-Founder at Bitlocus, a financial technology company that offers complete blockchain, crypto payments processing, exchange and liquidity services:
As a VASP, we are obliged to send CTRs to the FIU on all transactions over €15,000. To organize this, we need to employ some specially trained staff or invest in automated tools such as those offered by AMLYZE.
Our company has decided to invest in specific tools rather than leaving this task to our compliance officers. We believe that AML specialists should focus on their primary tasks – analyzing and investigating AML/CFT cases. We believe that automated tools reduce the likelihood of error, as manual work is always associated with human error.
The FIU carried out an inspection of our AML compliance system and decided not to open an infringement procedure because no serious infringements were found. This is confirmation that our decisions and procedures were timely, correct and appropriate.