We have a customer who has had a personal DDA account at our bank for many years. He has a unincorporated construction business.We have discovered he has been using his personal DDA account for business transactions also.

Outside of the bank losing fee income from the business account, is there anything wrong with using a personal DDA account for business purpose.

Too Tall -

Many laws and regulations differ in their scope and/or application based on whether an account is a personal or business account.

For example:

1. Reg E only applies to personal accounts.
2. ACH chargeback time limits differ between personal and business accounts.
3. Some states (e.g., WA) have different time periods for a customer to report forged maker checks for personal and business accounts.
4. Most, if not all, states provide that personal accounts are not subject to pre-judgment attachments whereas business accounts are subject to such attachments.

Personal accounts should not be commingled with business accounts. You only set yourself up for later problems if you permit commingling to occur.

Not to mention prohibitions on paying interest on business transaction accounts....

Couldn't that be seen as tax evasion?

It's actually your problem, not his problem in that your institution is responsible for the correct coding on accounts under Reg D. Perhaps the customer is a sole proprietor which entitles him to interest under a business NOW account. This kind of thing probably happens a lot, especially when a small business in involved.