Let's say you have a situation where a contractor withdraws cash for payment of wages in large even amounts with a notation in the memo field that states "payroll". Let's assume all minimum CIP checks out clean and there is no visible evidence giving the appearance that tax or social security, etc are taken out.

Of course a cash payroll is not illegal however it is illegal to pay persons who are not US citizens who do not have permission to work in the US. With articles and bullitins still being issued by Agencies, it is hard to look at activity such as this as not be suspicious. If looking strictly at red flags, I'd image this would be very far reaching.

What type of additional enhanced customer due dilligence would you perform on the customer in a situation such as this before making a SAR decision?

Thanks!!

I'd start by looking for evidence of the deposit of withheld payroll taxes. If you have the customer's whole banking enchilada, that's a lot easier. If you know you only have part of the business, you may have a problem.

You can approach the business owner to ask about direct deposit and (if you offer them) payroll card alternatives to cash payroll, and see what the response is.

If you can't document payroll tax deposits and you feel uneasy, file the SAR. Let law enforcement figure out if it's tax evasion or illegal "migrant" workers.

Let's add one more piece - what if we suspect an employee of our's is paying their 'employees' in cash?

Give your employees a lot less "benefit of the doubt" than you give your other customers.

Is it correct to assume that the SSA and the IRS don't know who is in the country illegally and receiving employment wages? Would only DHS or Immigrations have that information? I realize SSA won't initially issue a SSN unless the person has permission to work in the US, but if that permission expires, a company could continue to pay that person and remit wage taxes without the SSA or IRS notifying the employer?

In summary, just because a person has a valid social security number for the employer to report wage taxes under, it doesn't mean they are legally in the country - correct?

All valid points. My examiners and local US Attorney have told me the same thing that John stated earlier. Try to get answers but if customer is evasive or they lie, then file the SAR. It's up to law enforcement to investigate the situation.

Another related issue we struggle with is do these types of workers qualify as contract labor. If they do, then they don't have to withhold payroll taxes if I understand it correctly. I almost feel like I have to be a labor law expert these days.