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#2004304 - 03/26/15 04:08 PM Business Account with Personal Transactions
JArm83 Offline
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Joined: Mar 2015
Posts: 2
We have a business customer, an LLC, that has a ton of, what appear to be, personal transactions being conducted through the account. I would say approximately 70-80% of the activity on the account appears to be for personal purposes. The business in question is a small local manufacturer LLC and the expenses in question normally include 3 fast food POS debits each day, supermarket debits, gas station debits, cash withdrawals from ATMs and various other POS transactions that appear to have no business purpose and are out of pattern for a manufacturing company. I feel that this could potentially be a sign of tax evasion, having the business expense the personal expenses, but I do not have tax returns. There are multiple debit cards attached to the account all to family members of the owners, including the owners themselves, a daughter and a grandson. When I inquired with the branch that conducts the business' transactions, the branch staff indicated the debit card given to the grandson was purely for the grandson's college expenses. I had the branch contact the customer and verify that they knew the expenses were occurring, the customer indicated yes. I then had the staff ask if they were legitimate business expenses, to which the owner also indicated yes.

My question is, should I file a SAR, for tax evasion, since these transactions are out of pattern for a normal manufacturing company, the transactions appear to be for personal purposes and I have the owner indicating that these transactions are legitimate business expenses, when in reality the transactions appear to be for the personal use of the owner, daughter and grandson?

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#2004339 - 03/26/15 05:11 PM Re: Business Account with Personal Transactions JArm83
osucpa Offline
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Joined: May 2011
Posts: 1,406
Are the transactions suspision yes but tax evasion?

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#2004351 - 03/26/15 05:46 PM Re: Business Account with Personal Transactions JArm83
John Burnett Offline
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John Burnett
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Cape Cod
Unless you have some other evidence of potential tax evasion, I'd avoid filing a SAR for it. I see what appears to be a small business owner who doesn't have a clue about the significance or purpose of forming an LLC, and doesn't realize that commingling personal and business transactions is an easy way to allow creditors to "pierce the veil" to grab personal assets if the LLC fails to pay its bills.

If you truly see hints of tax evasion, by all means file away. But I'd be planning to show this customer the door for inappropriate use of a business account whether you file or not.
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#2004460 - 03/26/15 08:44 PM Re: Business Account with Personal Transactions JArm83
devsfan Offline
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Joined: Jun 2004
Posts: 1,927
NYC
We also see this type of activity with regularity and our approach is to have the branch warn the customer about the proper use of the business debit card, which is also outlined in the application which was signed by the customer. We do not file SARs but when we do file for other suspicious activity we include this information in the SAR narrative. Unfortunately we have never heard back from LE for supporting documents on these.

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#2004502 - 03/27/15 12:50 AM Re: Business Account with Personal Transactions JArm83
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,293
These: supermarket debits, gas station debits, cash withdrawals from ATMs and various other POS transactions

Could easily be business transactions.

This: multiple debit cards attached to the account all to family members of the owners, including the owners themselves, a daughter and a grandson. When I inquired with the branch that conducts the business' transactions, the branch staff indicated the debit card given to the grandson was purely for the grandson's college expenses.....

is not.
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#2004633 - 03/27/15 04:15 PM Re: Business Account with Personal Transactions JArm83
JArm83 Offline
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Joined: Mar 2015
Posts: 2
Thanks for all of the replies! Information has been very helpful!

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