Legal Definitions - suspicious-transaction report

A Suspicious-Transaction Report (STR) was a specific reporting mechanism used by financial institutions in the United States between 1990 and 1995. It required banks and other financial entities to flag and report certain customer transactions to the Internal Revenue Service (IRS) if those transactions appeared unusual or potentially linked to illegal activities. The primary goal was to identify and prevent financial crimes such as money laundering, tax evasion, or violations of the Bank Secrecy Act. The STR has since been replaced by the more comprehensive Suspicious-Activity Report (SAR).

Here are some examples of situations that would have triggered a Suspicious-Transaction Report:

• Example 1: Unexplained Large Cash Deposits

  A small, local dry-cleaning business, which typically processes payments via credit card and checks, suddenly begins making frequent, large cash deposits totaling $40,000 over a two-week period. There is no corresponding increase in their reported sales or any clear business reason for this sudden influx of cash.

  How it illustrates the term: This scenario would have triggered an STR because the sudden and unexplained volume of cash deposits, inconsistent with the business's usual operations, could suggest an attempt to "clean" illicit funds (money laundering) or hide undeclared income (tax evasion). The bank, observing this unusual pattern, would have been required to file an STR.

• Example 2: Structured Cash Withdrawals

  An individual with a modest salary and no apparent need for large sums of cash makes several withdrawals of $9,500 each from different branches of the same bank over a few days, totaling $28,500. Each withdrawal is just below the $10,000 threshold that would automatically trigger a currency transaction report.

  How it illustrates the term: This behavior, known as "structuring," is a classic indicator of an attempt to evade reporting requirements. The individual is intentionally breaking down a larger sum into smaller withdrawals to avoid drawing attention. Had this occurred between 1990 and 1995, the bank's staff, noticing this pattern across branches, would have been obligated to file an STR, as it strongly suggests an attempt to conceal the true purpose of the funds, potentially for illegal activities.

• Example 3: Unusual International Wire Transfers

  A customer who previously only conducted domestic transactions and has no known international business connections suddenly initiates multiple large wire transfers, each exceeding $20,000, to a personal account in a country known for strict bank secrecy laws, without providing a credible explanation for these transfers.

  How it illustrates the term: The sudden and unexplained movement of significant funds to an offshore location, especially by an individual whose financial profile doesn't typically involve such transactions, would have raised a red flag. This pattern could indicate an attempt to move illicit funds out of the country or hide assets from tax authorities. During the STR's operational period, the bank would have been required to report such suspicious activity to the IRS.