Sorry for this, but I am just at a loss. We have a customer who has an established checking account. Opened with ITIN and current DL. We don't run credit check, just ChexSystem. All ok. Now he applies for a loan. We run the credit on the ITIN and two SSNs come back in his name. When questioned about them, he says, yes, when he came to the U.S. very illegally in 1995 and started working for a company, they 'gave' him a couple of numbers to use so he could work. But he doesn't use them any more and has no credit under those numbers. To top it off, he is still illegal, doesn't report his cash income to the IRS (he said this) and is the husband of one of my (legal) tellers. Any help on what to say on the SAR or boxes to check would be appreciated....

Your primary reporting triggers are 1) he provided false information at the time you performed CIP, 2) identify theft and 3) income tax evasion. While I don't particularly agree with the second label, federal court decisions have held that using someone else's number constitutes identity theft. You are not filing the SAR because he is illegal.

As far as how to write the narrative, you have already written most of it in your post. Flesh it out with details, but most of the damning information came out of his mouth, nowhere else. Pssstt !!!Don't tell anyone, but I might just leave out the part about his being married to one of my tellers.

Confusing to me, but perhaps not relevant to the SAR: You said his spouse was "legal," you did not say she was a citizen. Obviously, marriage to a citizen would entitle him to petition for citizenship. However, it would also get him above the radar for income taxes and it may not be worth the trade off. Yet, why would he get an ITIN if he has no intention of paying taxes?

We have a copy of his 2010 tax return filed under his ITIN - he files separately - and claims only the check portion of what he gets paid - roughly 1/4 of his income. The other 3/4 of his income is paid to him in cash (again, he said this) which he admits that he does not report. He also claims three nieces as dependents that reside in Mexico - not with him in the US. We have never seen this before - he doesn't even claim his own three kids. Should I cover this bit in my narrative as well?

A digression from the SAR question, but Ken, being married to a citizen does not necessarily entitle him to apply for citizenship. The provision allowing persons who came in illegally to pay a fine and apply to become "legal" based on marriage to a U.S. citizen has sunset. So in many instances, letting CIS know about your presence in the U.S. can mean deportation.

We have a copy of his 2010 tax return filed under his ITIN - he files separately - and claims only the check portion of what he gets paid - roughly 1/4 of his income. The other 3/4 of his income is paid to him in cash (again, he said this) which he admits that he does not report.

Either he is under-reporting his Taxes or he is misstating his income to a Federaly Insured Inst.

FWIW, I disagree that a SAR is triggered here. Yes, you suspect he is evading taxes. Yes, you got some confusing information when you tried to pull credit, and his explanation is bonky (weird) and causes you to suspect he is illegal and not paying enough taxes.

But, did he try to commit a criminal act, by, to, or through your institution? No. Absolutely not. His immigration status has nothing to do with his banking transactions. His willingness and ability to pay taxes has nothing to do with his application for a loan - other than that you can use it to deduce his ability and willingness to repay you.

I would, of course, deny his loan, and that of probably anyone else whose income is "undocumented" and "under the table," but not liking his life choices, for things happening far outside of your bank, is not reportable on a SAR.

If the applicant applied for a loan and supplied you false documentation, that's loan fraud. It requires an SAR.

Original poster here - This is the issue I have - I feel more like I am tattling on someone than reporting something for a SAR. Did he supply false documentation - I guess that is where I should focus? He supplied his tax return, then said that he only reported the income that he was paid by check. How could we ever prove that he said this other than the loan officer was so shocked when he heard it, he told me about it. But this guy still qualifies for the loan based on the numbers he did provide. So do we not make the loan because of the information that he provided was shady?

Some banks take the view that when the customer tells you they lie on their taxes they are making you complicit. You now have knowledge.

You don't have to prove anything to file a SAR. That's the job of law enforcement. Your SAR is to give a heads up that something isn't right. Your SAR documentation would include a summary of the loan officer's conversation with the customer and a copy of the tax returns, and anything else you might find. Are you tattling? Maybe, but who cares. The customer was dumb enough to tell you he's under reporting his income.