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October 24
How to Audit Advertising - Compliance Issues Here, There, Everywhere!;
Patricia Cashman

October 29
Documenting an Applicant's Intent to be a Joint Applicant;
David Dickinson

November 4
Issues with Deceased Customers;
Mary Beth Guard and John Burnett

November 5
Vault Burglaries, Floods, Fires & Other Disasters;
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November 6
MLO v LO - Who Has to Do What?;
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November 13
Domestic Violence & Workplace Violence: There Is A Link;
Shelly Collins and Dana Turner



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#1652431 - 01/18/12 04:03 PM SAR Tax Evasion
mstark Offline
Gold Star

Registered: 03/28/06
Posts: 312
Loc: Bank
We have a loan customer who notified us they have 20,000 dollars of income not reported.

Should we file a SAR on this individual for tax evasion or is that an IRS issue?
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BSA/AML/CIP/OFAC
#1652449 - 01/18/12 04:06 PM Re: SAR Tax Evasion [Re: mstark]
JacFSB Offline

Power Poster

Registered: 11/19/01
Posts: 6059
Loc: PA
Others may offer a different view, but I am never a proponent of filing for suspected tax evasion, in and of itself. Failure to report certain income to the IRS is not an activity conducted at or through the bank, so I see no grounds for a SAR.

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#1652456 - 01/18/12 04:23 PM Re: SAR Tax Evasion [Re: mstark]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50412
Loc: Galveston, TX
Originally Posted By: mstark
We have a loan customer who notified us they have 20,000 dollars of income not reported.

Should we file a SAR on this individual for tax evasion or is that an IRS issue?


I concur with AgentP, unless they somehow misrepresented their income on any information provided to the bank as that would be loan fraud. If the customer just told the loan officer that, then I don't see it as actionable.

Please tell us the LO didn't include the $20,000 in the credit underwriting process........
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The opinions expressed are my own, take them or leave them.

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#1652464 - 01/18/12 04:28 PM Re: SAR Tax Evasion [Re: mstark]
BrendaC Offline
Power Poster

Registered: 09/18/01
Posts: 6029
Loc: Sweet Home AL
If the customer indicated that in a prior tax year, he had $20k that he knew was reportable as income, but he failed to do so, I would file a SAR.

If he indicated that he had $20k for current tax year that was not reflected in his income, I probably would not file. He has not committed tax fraud...yet.
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Life without Jesus is like an unsharpened pencil - it has no point.

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#1652468 - 01/18/12 04:17 PM Re: SAR Tax Evasion [Re: mstark]
Doug Hendrickson Offline
Power Poster

Registered: 10/01/09
Posts: 3405
Loc: NE New Mexico
My major concern would be how the lender is verifying the income that is allegedly not being reported. This is especially critical on HPMLs, but will start becoming more so on all loans eventually.
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I hear and I forget. I see and I remember. I do and I understand.--Confucius

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#1652469 - 01/18/12 04:18 PM Re: SAR Tax Evasion [Re: BrendaC]
JacFSB Offline

Power Poster

Registered: 11/19/01
Posts: 6059
Loc: PA
Originally Posted By: BrendaC
If the customer indicated that in a prior tax year, he had $20k that he knew was reportable as income, but he failed to do so, I would file a SAR.


Even if it has nothing to do with activity conducted at or through the bank?

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#1652470 - 01/18/12 04:19 PM Re: SAR Tax Evasion [Re: Doug Hendrickson]
JacFSB Offline

Power Poster

Registered: 11/19/01
Posts: 6059
Loc: PA
Originally Posted By: Doug Hendrickson
My major concern would be how the lender is verifying the income that is allegedly not being reported. This is especially critical on HPMLs, but will start becoming more so on all loans eventually.

And I think that's where randy was going with his statement about not including the $20k in underwriting.

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#1652509 - 01/18/12 05:11 PM Re: SAR Tax Evasion [Re: mstark]
edAudit Offline
Power Poster

Registered: 07/18/08
Posts: 2959
Loc: You are here
http://www.ffiec.gov/bsa_aml_infobase/documents/new_6_08/SAR_Act_Rev_12.pdf

PAGE 14

Law Enforcement Support
Several Other types of suspicious activity are regularly indicated and are of enormous value to specific law enforcement agencies, such as: Tax Evasion; Fraudulent W-2; Narcotics Trafficking; Currency Smuggling; and Employing Illegal Aliens.

Would they be voluntary?
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Opinions can be considered as coming from anywhere but my employer.

CAMS


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#1652513 - 01/18/12 05:30 PM Re: SAR Tax Evasion [Re: mstark]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50412
Loc: Galveston, TX
I agree, if you have something to support it. Think of your supporting documentation. A hand written note saying that the applicant mentioned this to a LO in a loan interview? That is a little different from providing fraudulent W-2 and other suspicion of tax evasion that can be supported through documentation in possession of the bank.
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The opinions expressed are my own, take them or leave them.

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#1652557 - 01/18/12 10:30 PM Re: SAR Tax Evasion [Re: mstark]
JacFSB Offline

Power Poster

Registered: 11/19/01
Posts: 6059
Loc: PA
But even a fraudulent W2 or tax return doesn't necessarily indicate tax evasion. Loan fraud, sure. Tax evasion, possibly, but not likely.

Ed- to answer your question as to whether or not those filings are voluntary, I'd say what does the activity look like? If it's reportable activity, file it. Narcotics trafficking, employing illegal aliens- these are almost always going to involve transaction activity that, in and of itself, meets the reporting thresholds. And if, when reporting suspicious activity, you suspect tax evasion is a factor, say so.

All I'm saying though, is that as a standalone reason, it's next to impossible to justify filing for tax evasion because tax evasion isn't activity.

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#1652626 - 01/19/12 08:48 AM Re: SAR Tax Evasion [Re: mstark]
ACBbank Online
Power Poster

Registered: 07/26/06
Posts: 2623
Loc: New York City
I don't know Agent. I have a number of customers who are cashing out checks made payable to "cash" and using the funds to pay employees. Every regulator and LE Officer I have spoken to want SAR's filed for tax evasion (payroll).

However, in this particular case, I agree with you. There does need to be some activity going at or through the bank. A comment alone won't do it.
_________________________
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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#1652661 - 01/19/12 09:39 AM Re: SAR Tax Evasion [Re: ACBbank]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50412
Loc: Galveston, TX
"I have a number of customers who are cashing out checks made payable to "cash" and using the funds to pay employees. Every regulator and LE Officer I have spoken to want SAR's filed for tax evasion (payroll). "

I'm not sure how paying a cash payroll equals tax evasion. They may be paying independent contracts or they may be paying their proper withholding taxes. While it might trigger a quick investigation, it is not a one size fits all outcome.
_________________________
The opinions expressed are my own, take them or leave them.

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#1652667 - 01/19/12 09:31 AM Re: SAR Tax Evasion [Re: mstark]
BrendaC Offline
Power Poster

Registered: 09/18/01
Posts: 6029
Loc: Sweet Home AL
AgentP - From SAR Activity Review...

"By requiring the reporting of transactions “conducted or attempted by, at, or through” an institution, FinCEN recognizes that reportable activity does not necessarily happen at an institution’s physical location."
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Life without Jesus is like an unsharpened pencil - it has no point.

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#1652751 - 01/19/12 10:34 AM Re: SAR Tax Evasion [Re: mstark]
JacFSB Offline

Power Poster

Registered: 11/19/01
Posts: 6059
Loc: PA
I'm not arguing that point- reportable activity can happen in just about any location, but it still has to happen. The statement simply clarifies that the activity can be done by the bank or through the bank, and not just at the bank.

Consider the original scenario- a loan applicant says he doesn't report all of his income. What activity has taken place to support the SAR? And how can it be quantfied?

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#1652811 - 01/19/12 11:07 AM Re: SAR Tax Evasion [Re: mstark]
John Burnett Offline
10K Club

Registered: 10/27/00
Posts: 30717
Loc: Cape Cod
If a loan applicant claims that he has annual income of $150,000 on an application for a $300,000 mortgage and you see that his most recent tax return reflects income of only $75,000, you will require him to to reconcile the two numbers, right? If you determine that he can't reconcile the numbers, he either overstated his income to the bank (fraudulent loan application) or understated his income to the IRS (possible tax evasion). In either case, you've got a SAR to consider.

But a simple statement (braggadocio?) that he didn't report income to the IRS when it's not related to any transaction at the bank doesn't pull my SAR trigger.
_________________________
John S Burnett
BankersOnline.com

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#1652866 - 01/19/12 11:29 AM Re: SAR Tax Evasion [Re: mstark]
AquaMarine Offline
100 Club

Registered: 06/23/11
Posts: 141
Loc: New York, NY
Unless you tape recorded the conversation, there is no supporting documentation. Hence, a SAR should not be filed solely based on a verbal comment.
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"Give thanks in all circumstances; for this is God’s will for you in Christ Jesus." -Thessalonians 5:18


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#1652938 - 01/19/12 12:12 PM Re: SAR Tax Evasion [Re: rlcarey]
ACBbank Online
Power Poster

Registered: 07/26/06
Posts: 2623
Loc: New York City
Originally Posted By: rlcarey
"I have a number of customers who are cashing out checks made payable to "cash" and using the funds to pay employees. Every regulator and LE Officer I have spoken to want SAR's filed for tax evasion (payroll). "

I'm not sure how paying a cash payroll equals tax evasion. They may be paying independent contracts or they may be paying their proper withholding taxes. While it might trigger a quick investigation, it is not a one size fits all outcome.


Agreed. But the conversations that I have had with regulators go along the lines of "It's not proof of tax evasion, but is suggestive of it." I'm not going to play accountant and attempt to reconcile tax returns to bank statements. It's almost easier to file the SAR and be done with it.
_________________________
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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#1652955 - 01/19/12 12:31 PM Re: SAR Tax Evasion [Re: mstark]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50412
Loc: Galveston, TX
I wonder why tax evasion is not a check box on the SAR form whistle
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The opinions expressed are my own, take them or leave them.

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#1652966 - 01/19/12 12:35 PM Re: SAR Tax Evasion [Re: John Burnett]
Kathleen B Online

10K Club

Registered: 12/27/00
Posts: 17595
Originally Posted By: John Burnett
If a loan applicant claims that he has annual income of $150,000 on an application for a $300,000 mortgage and you see that his most recent tax return reflects income of only $75,000, you will require him to to reconcile the two numbers, right? If you determine that he can't reconcile the numbers, he either overstated his income to the bank (fraudulent loan application) or understated his income to the IRS (possible tax evasion). In either case, you've got a SAR to consider.

But a simple statement (braggadocio?) that he didn't report income to the IRS when it's not related to any transaction at the bank doesn't pull my SAR trigger.

This I agree with.
_________________________
Kathleen Blanchard CRCM "Kaybee"
Lending/CRA/HMDA/Mapping/Consulting
www.kaybeescomplianceinsights.com

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#1653120 - 01/19/12 01:58 PM Re: SAR Tax Evasion [Re: rlcarey]
ACBbank Online
Power Poster

Registered: 07/26/06
Posts: 2623
Loc: New York City
Originally Posted By: rlcarey
I wonder why tax evasion is not a check box on the SAR form whistle


Preaching to the choir Sir.
_________________________
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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