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#1652431 - 01/18/12 09:03 PM SAR Tax Evasion
mstark Offline
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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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#1652449 - 01/18/12 09:06 PM Re: SAR Tax Evasion mstark
JacF Offline

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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 09:23 PM Re: SAR Tax Evasion mstark
rlcarey Online
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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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#1652464 - 01/18/12 09:28 PM Re: SAR Tax Evasion mstark
BrendaC Offline
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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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#1652468 - 01/18/12 09:17 PM Re: SAR Tax Evasion mstark
Doug Hendrickson Offline
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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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#1652469 - 01/18/12 09:18 PM Re: SAR Tax Evasion BrendaC
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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 09:19 PM Re: SAR Tax Evasion Doug Hendrickson
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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 10:11 PM Re: SAR Tax Evasion mstark
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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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#1652513 - 01/18/12 10:30 PM Re: SAR Tax Evasion mstark
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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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#1652557 - 01/19/12 03:30 AM Re: SAR Tax Evasion mstark
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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 01:48 PM Re: SAR Tax Evasion mstark
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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.
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#1652661 - 01/19/12 02:39 PM Re: SAR Tax Evasion ACBbank
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"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.
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#1652667 - 01/19/12 02:31 PM Re: SAR Tax Evasion mstark
BrendaC Offline
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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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#1652751 - 01/19/12 03:34 PM Re: SAR Tax Evasion mstark
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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 04:07 PM Re: SAR Tax Evasion mstark
John Burnett Offline
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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.
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#1652866 - 01/19/12 04:29 PM Re: SAR Tax Evasion mstark
AquaMarine Offline
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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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#1652938 - 01/19/12 05:12 PM Re: SAR Tax Evasion rlcarey
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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.
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#1652955 - 01/19/12 05:31 PM Re: SAR Tax Evasion mstark
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I wonder why tax evasion is not a check box on the SAR form whistle
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#1652966 - 01/19/12 05:35 PM Re: SAR Tax Evasion John Burnett
Kathleen O. Blanchard Offline

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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.
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#1653120 - 01/19/12 06:58 PM Re: SAR Tax Evasion rlcarey
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Originally Posted By: rlcarey
I wonder why tax evasion is not a check box on the SAR form whistle


Preaching to the choir Sir.
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#2152060 - 11/02/17 03:19 PM Re: SAR Tax Evasion mstark
Red Raiders Offline
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Kind of along these same lines...

We have a commercial loan customer who purchased real estate and each of the last three months has made payments of around $12k but $9k in cash then writing a check for the other $3k. What are your thoughts on this? The LO has explained where the cash comes from but just seems odd that loan payments are never over $10k in cash but consistently $9k.
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#2152067 - 11/02/17 03:23 PM Re: SAR Tax Evasion mstark
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File.
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#2152076 - 11/02/17 03:34 PM Re: SAR Tax Evasion mstark
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File, and generally cash loan payments alert for us at fairly low levels and if it's a continuing thing we instruct the account officer to re-direct the customer's cash activity to the appropriate deposit account (and give them the CTR Reference Guide, if needed).

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#2152096 - 11/02/17 04:24 PM Re: SAR Tax Evasion mstark
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Thanks for confirming my suspicion. What box(es) in Part II of the SAR do you think would be marked for this type of activity?
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#2152101 - 11/02/17 04:34 PM Re: SAR Tax Evasion mstark
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Suspicion concerning source of funds, and 'other' for unusual cash. That's how we do it.

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