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#1616632 - 10/17/11 10:06 PM SAR Tax Evasion
BC78a Offline
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I have a new customer, which is a cash intensive business.

Customer claims we are his only bank; yet in the first 4 months total cash deposits equal $9,500.00. We want to file a SAR for Tax Evasion, however, I am not sure what amount we should be using on the SAR; any suggestions?

Thanks,
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#1616646 - 10/17/11 11:52 PM Re: SAR Tax Evasion BC78a
rlcarey Offline
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How do you know they are cash intensive?
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#1616651 - 10/18/11 12:12 AM Re: SAR Tax Evasion rlcarey
Kathleen O. Blanchard Offline

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Also, what due diligence did you do on this new customer? What deposits did you expect, according to your profile?

What do you know about what they do, how much they are doing in sales, what else any cash could be used for?

Based on the little explained here, I would find it hard to leap right to a SAR. You may have more information on which you are basing your decision but it is hard to give an opinion on what to report on the little we know.
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#1616715 - 10/18/11 01:08 PM Re: SAR Tax Evasion Kathleen O. Blanchard
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Business is a hair and nail salon. Based on similar business we would expect cash. Customerís projected activity profile, from when they opened the account showed zero cash; branch did not question this.
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#1616764 - 10/18/11 02:17 PM Re: SAR Tax Evasion BC78a
Hrothgar Geiger Offline
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Just out of curiosity; are their deposits mostly checks and ACH?

Are the deposits in total in keeping with the observed/estimated volume of business?

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#1616765 - 10/18/11 02:19 PM Re: SAR Tax Evasion BC78a
ACBbank Offline
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If you're any where near me BC, $9,500 for a hair/nail salon over 4 months isn't that out of the ordinary. I have some similar types of business that do that in a couple of days.

I know that there are some PB's at my FI would really do a bad job when completing the initial risk assessment. Could this be the issue?
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#1616771 - 10/18/11 02:24 PM Re: SAR Tax Evasion ACBbank
edAudit Offline
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You are here
I would say that you would need more information

Is the salon open all days or just weekends.

ACH? Checks?

Working out of house?

Did the shop just open?
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#1616774 - 10/18/11 02:26 PM Re: SAR Tax Evasion edAudit
John Burnett Offline
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Does the salon accept plastic?
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#1616775 - 10/18/11 02:32 PM Re: SAR Tax Evasion BC78a
Elwood P. Dowd Offline
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You have an advantage because you have other customers in the same business, they provide your baseline. Compare the make up of their receipts to those of this customer in terms of both amounts and percentages by the type of payments; e.g. checks, ACH, credit cards, etc.

Now, the hard part: determine whether their pricing and volume of business is comparable to that of their peers within your institution.

I'm aware of a SAR filing based on the absence of cash that played a pivotal role in a law enforcement investigation, but the SAR was only persuasive because it demonstrated that the customer's activity was wildly different than that of several peer businesses in the same immediate area.
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#1616809 - 10/18/11 03:10 PM Re: SAR Tax Evasion Hrothgar Geiger
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Only ACH - Credit Cards
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#1617072 - 10/18/11 07:14 PM Re: SAR Tax Evasion BC78a
DebL Offline
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You may also want to consider whether or not the salon receives all customer payments because the stylists are salon employees or if stylists rent stations. I've seen it done both ways. That would make a difference in their activity.
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#1617104 - 10/18/11 07:34 PM Re: SAR Tax Evasion DebL
Hrothgar Geiger Offline
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In addition, there is a less wholesome possibility. You could look at the timestamps for credit card transactions.

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#1617200 - 10/18/11 08:52 PM Re: SAR Tax Evasion Elwood P. Dowd
Kathleen O. Blanchard Offline

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Originally Posted By: Ken_Pegasus
You have an advantage because you have other customers in the same business, they provide your baseline. Compare the make up of their receipts to those of this customer in terms of both amounts and percentages by the type of payments; e.g. checks, ACH, credit cards, etc.

Now, the hard part: determine whether their pricing and volume of business is comparable to that of their peers within your institution.

I'm aware of a SAR filing based on the absence of cash that played a pivotal role in a law enforcement investigation, but the SAR was only persuasive because it demonstrated that the customer's activity was wildly different than that of several peer businesses in the same immediate area.

One thing I would add to this good advice...determine how much business the customer is actually doing. It might not be a successful salon. Make sure you compare apples to apples.
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#1617218 - 10/18/11 09:01 PM Re: SAR Tax Evasion Kathleen O. Blanchard
BC78a Offline
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Thank you all for your help and advice
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