2.3 Currency Reporting and Cash Sweeps

Anti-Money Laundering (AML) Reporting: CTRs & SARs

Cashiering personnel serve as the frontline defense under the Bank Secrecy Act (BSA) and USA PATRIOT Act. Operations professionals must recognize reporting triggers and meet strict regulatory filing deadlines established by the Financial Crimes Enforcement Network (FinCEN).

Currency Transaction Report (CTR - FinCEN Form 112)

• Filing Trigger: Mandated for any transaction (or multiple aggregated transactions) involving physical currency exceeding $10,000 in a single business day.
• Definition of Currency: Physical paper currency and coin. (Note: Personal checks, Fedwires, and ACH transfers are not currency. However, cashier's checks, bank drafts, and money orders with face amounts under $10,000 purchased with cash may trigger aggregation under BSA rules).
• Aggregation Rule: Broker-dealers must aggregate multiple cash transactions conducted by or on behalf of the same person across all accounts within the firm during a single business day.
• Filing Deadline: Must be filed electronically with FinCEN within 15 calendar days following the date of the transaction.
• Structuring: Intentionally breaking up cash deposits into increments below $10,000 (e.g., depositing $9,500 today and $9,500 tomorrow) to avoid a CTR is the federal crime of structuring, which must be escalated for SAR review under applicable thresholds and requirements.

Suspicious Activity Report (SAR - FinCEN Form 111)

• Filing Trigger: Mandatory for any transaction (or attempted transaction) conducted by, at, or through the broker-dealer involving at least $5,000 in funds or other assets, where the firm knows, suspects, or has reason to suspect that the transaction:
  1. Involves funds derived from illegal activity or is intended to hide or disguise illicit assets;
  2. Is designed to evade Bank Secrecy Act regulations (including structuring);
  3. Has no business or apparent lawful purpose and is not the sort of transaction in which the particular customer would normally engage; or
  4. Involves the use of the broker-dealer to facilitate criminal activity.
• Filing Deadline: Must be filed with FinCEN within 30 calendar days after the date of the initial detection of facts that may constitute a basis for filing. If no suspect can be identified on the date of initial detection, the deadline may be extended by an additional 30 calendar days to identify a suspect, but in no case may filing exceed 60 calendar days from the date of initial detection.
• Absolute Confidentiality ("No Tipping Off"): Federal statute (31 U.S.C. 5318(g)(2)) strictly prohibits any associated person or broker-dealer from disclosing that a SAR has been prepared or filed, or disclosing any information that would reveal that a SAR is being contemplated. Disclosing a SAR to the customer or any unauthorized party ("tipping off") is a federal criminal violation carrying substantial fines and imprisonment.
• Safe Harbor Protection: 31 U.S.C. 5318(g)(3) provides broad immunity from civil liability to financial institutions and their employees for reporting known or suspected violations of law via a SAR.

Cash Sweeps and Sweep Programs

Customer accounts regularly generate uninvested cash balances resulting from dividend distributions, interest payments, securities sales, or fresh deposits. Broker-dealers maintain automated cash sweep programs to keep client capital productive and protected while awaiting investment.

Sweep Vehicles: Money Market Funds vs. Bank Deposit Sweeps

1. Money Market Mutual Funds (MMMFs):
   • Registered under the Investment Company Act of 1940 and governed by SEC Rule 2a-7.
   • Invest in short-term high-quality debt obligations (Treasuries, commercial paper, repos).
   • Covered by the Securities Investor Protection Corporation (SIPC) up to $500,000 (with a $250,000 limit on uninvested cash claims) in the event of broker-dealer failure.
   • Money market funds are securities investments; they are not FDIC-insured and carry credit and interest rate risk.
2. Bank Deposit Sweep Programs (BDSPs):
   • Uninvested cash balances are automatically swept into interest-bearing deposit accounts at one or more participating commercial banks (often affiliate banks or multi-bank networks).
   • Covered by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per insured depository institution.
   • By cascading deposits across an affiliated network of multiple banks, broker-dealers can provide multi-million-dollar FDIC protection for large client cash balances. Once swept into the banking network, the cash is protected by FDIC insurance rather than SIPC.

Reporting Is Separate from Insurance

A CTR records qualifying physical-currency activity; sweep insurance concerns the destination and ownership of an eligible deposit. Neither an FDIC-insured sweep nor a money market fund makes suspicious movement exempt from AML review. Aggregate bank deposits in the same ownership category when evaluating FDIC limits, including deposits the customer holds outside the sweep program. SIPC does not protect against a money market fund’s investment losses.

Sources checked 2026-10-20: FINRA account transfers, FinCEN broker-dealer guidance.