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#1414840 - 07/14/10 04:07 PM Reasoning behind payroll exemption
CynthiaParker Offline
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Midwest
Can you please explain what the reasoning is behind exempting a customer who withdraws more than $10,000 in currency for the purpose of paying employees? This sounds like an exemption is paying employees "under the table" which seems like an IRS conflict, at least.
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#1414910 - 07/14/10 05:36 PM Re: Reasoning behind payroll exemption CynthiaParker
NewTooBSA Offline
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Cynthia
I dont think there is a good reason for exempting the customer you described. As far I my bank is concerned, I would never exempt someone if that is the reason for the cash withdrawals. That is just my opinion but I agree with it sounding like they are paying "under the table".

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#1414917 - 07/14/10 05:43 PM Re: Reasoning behind payroll exemption CynthiaParker
Spenser Offline
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If a bank monitors cash withdrawals, for currency transaction purposes, employees cashing their checks appears as cash out of an employer's account. So,a currency transaction report may indicate transactions exceeding the $10,000 limit, when it was really multiple instances of payroll checks being negotiated.

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#1414918 - 07/14/10 05:44 PM Re: Reasoning behind payroll exemption NewTooBSA
CynthiaParker Offline
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Well, the regulation permits it, but I have never understood why because of how it appears to me. I figured there must be some abvious reason that I'm overlooking. Thanks for your opinion, and I hope someone with additional insight will weigh in.
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#1414928 - 07/14/10 05:51 PM Re: Reasoning behind payroll exemption Spenser
CynthiaParker Offline
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I'm not quite sure this fits, since even though the aggregate may be over $10,000, it wouldn't be reportable since multiple people cashing multiple paychecks isn't conducted by or on behalf of a single person/entity.

The regulation is specific to "payroll customers" who regularly withdraw more than $10,000 in order to pay its US employees in currency, etc. (From the Reg and 2010 BSA Exam Manual)
Thanks for responding~
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#1414960 - 07/14/10 06:35 PM Re: Reasoning behind payroll exemption CynthiaParker
John Burnett Offline
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There are still employers out there who pay laborers -- migrant farm workers are but one example -- in cash, withdrawing the cash in one bundle and doling it out in the style you may remember seeing in the movies, in which each worker approaches the paymaster table, signs for his pay and walks away with the cash.

As long as the tax withholding is properly done, it's a perfectly legal way to do payroll, albeit a holdover from the 19th century. The workers in these scenarios typically do not have bank accounts and would have difficulty cashing a check at a bank.

The exemption is a way in which a bank can exempt just the payroll withdrawals of such businesses.
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#1414996 - 07/14/10 07:01 PM Re: Reasoning behind payroll exemption CynthiaParker
rlcarey Offline
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It's a throw back to a long gone time.
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#1415050 - 07/14/10 08:13 PM Re: Reasoning behind payroll exemption rlcarey
John Burnett Offline
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Speaking of throwbacks, the $10,000.01 CTR trigger amount has been static since the 1970s.
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#1415119 - 07/14/10 09:38 PM Re: Reasoning behind payroll exemption John Burnett
CynthiaParker Offline
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Joined: Apr 2006
Posts: 45
Midwest
Thanks so much for your input. It does make sense as long as the withholding is being documented.

And yes, I remember the movies of farm/dock workers approaching the boss for their pay.

Thanks again
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#1415187 - 07/15/10 10:49 AM Re: Reasoning behind payroll exemption CynthiaParker
Elwood P. Dowd Offline
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As I age I get more cynical. It's really helpful.

This exemption is completely incongruent with AML fundamentals. I think they continue to allow it because it helps ICE and the IRS find businesses that employ illegals or fail to pay required withholding taxes; i.e. in my opinion exempting these people is not a good idea, but it may be more effective in drawing the attention of the appropriate agencies than filing a SAR. wink
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#1415794 - 07/16/10 01:37 AM Re: Reasoning behind payroll exemption Elwood P. Dowd
Kathleen O. Blanchard Offline

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I had a job early on where I was paid in cash, net of all deductions.

http://www.shoplet.com/UNV00001_Office_Supply_universal_payroll_envelopes.html
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#1416397 - 07/17/10 10:13 AM Re: Reasoning behind payroll exemption Kathleen O. Blanchard
Elwood P. Dowd Offline
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The first bank where I worked paid its employees in cash every month, but we didn't get any cool envelopes like those shown; it was just plain brown. That was 1972.
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#1416406 - 07/17/10 03:55 PM Re: Reasoning behind payroll exemption Elwood P. Dowd
Kathleen O. Blanchard Offline

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I got cool envelopes with the deductions broken out.
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