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Your Customers Need Your Help!

As more and more emphasis is put on money laundering and the ways to stop it, merchants are joining the financial institutions in the country in becoming aware of "Know Your Customer" requirements.

Banks and other financial institutions and entities have long been aware of the Bank Secrecy Act and its mandated filing with the Internal Revenue Service (IRS) for any transaction involving over $10,000 in cash. Form 4789 is filed within 15 days of the transaction with the IRS in Detroit, or filing is done electronically.

The Bank Secrecy Act and the Anti-Money Laundering Act that followed it also requires retail business to file on sales involving over $10,000 in cash, in a single transaction or in a series of related transactions which in aggregate total over $10,000. Form 8300, similar to the banking form 4789, must be completed by the merchant and filed within 15 days of the sale.

If the form is not completed, the merchant is inviting an in-depth inquiry from the IRS or other government agencies. And we do mean "completed"-IRS will sharply rebuke a form with blank spaces. Sources in Washington tell us that Senate hearings will probably begin in 1992 on the filing (or lack of filing) of "non-financial institutions" on transactions over $10,000. The Congressional spotlight is going to swing from us to our customers.

Attention was focused on the Form 8300 filing when a team from the office of one of the members of a banking committee went out to see if they could convince merchants to make a sale, but not file a form 8300. They were successful 96% of the time!

New Regulation
As of February 3, 1992 any person engaged in a trade or business who receives in the course of business cash in excess of $10,000 in one transaction (or two or more related transactions) must file a form 8300. The final rule from the Department of the Treasury defines "cash" as "coin and currency and specified monetary instruments such as cashier's checks, bank drafts, traveler's checks and money orders if they have a face amount of not more than $10,000."

If these instruments are used to purchase consumer durables or collectibles (i.e. personal property that can reasonably be expected to be useful for at least one year and has a sales price of more than $10,000)... or...are used for retail sales of a travel or entertainment activity, a from 8300 must be filed.

Of course, in the way of regulations, there are exceptions and complications.

For instance, if a bank check is the direct proceeds of a loan, used to buy a car, the automobile dealer does not have to file an 8300. Say you bought an $11,000 car, paid $2,000 in cash and borrowed the rest from a bank, and the bank gave you a check for $9,000. You would show the automobile dealer the loan papers and there would be no filing necessary.

If, however, after giving the dealer $2,000 in cash, you went to the bank and withdrew $9,000 from your savings in the form of a cashier's check, the dealer would be required to file an 8300.

We are used to the details and quirks of government regulations, but our customers are not. They're going to need help. And as their banker, you can provide the service they need. You'll want to be up-to-snuff on this regulation.

See the Federal Register/ Vol. 56, No. 221/ Friday, Nov. 15, 1991/ Rules and Regulations-pages 57974 through 57977-or call the Bankers' Hotline office for a copy at (215) 874-5522.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 10, 11/91

First published on 11/01/1991

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