I am looking for feedback from others on how you handle split deposits for sole proprietors. My customer has a DBA account using his SSN. He comes in to make a deposit with a check for $10,000 drawn off another institution payable to John Doe Construction. He wants to deposit $5,000 into the business account and receive $5,000 back in cash. Do others allow for these types of transactions or do you treat these the same as corporate accounts where you would require that the entire check be deposited and a check written off the account for the cash back portion? This is a regular routine for this particular customer.

Thanks in advance.

deposit full amount and withdrawal what he wants back

I agree with Happy, but other than "that's the way we've always done it," I can't point to why I agree. No law requires it - if someone wants to run their business this way, why shouldn't we let them?

If the policy already says "no cash back on business accounts" (which my previous institution's policy said) then there is no problem. But if you are wanting to change current policy to stop allowing this practice, I'd love to know what reason/justification you'll use to sell the change to management.

Justification: Not having two different policies on cash-back for businesses makes training tellers easier. How's a teller to reliably know that he or she is dealing with a sole proprietor, rather than the sole member of an LLC whose deposit tickets haven't been updated.

At a previous employer, they allowed up to $1,000 cash back from a deposit to a Sole Prop business account. I have no idea why this figure.

At my current employer, we make the full deposit to the business account.

Justification II: Splitting a deposit for a business may facilitate embezzlement, particularly if the bank does not require a signature from the individual who receives the cash.

Justification III: Accepting checks for deposit without assuring that the entire amount is reflected on the customer's statement facilitates income tax evasion and money laundering.

Thanks for everyone's feedback. I agree with all the comments above I just wish I could get the buy in I need from retail. They seem to think that by the customer using their own SSN and it being a DBA that there are no issues to address. It's the customer's funds and they can do whatever they want to with it. Ultimately I just think it makes more sense to have one policy across the board concerning commercial deposits. If you're not trying to hide anything why not deposit all the funds and make a separate withdrawal for your cash? Just the suspicious nature in me I guess.

Thanks again!

To echo a comment made my John earlier regarding banks not being notified of a change in business:

I had a customer who initially started doing business as a sole proprietor. He opened his account with his social security number and had a ficticious name (DBA).

At some point, he obtained an EIN and formed an LLC using the name that was the DBA. He went quite a while before finding the need to inform the bank (which only happened because he wanted to add a signer on the account & produced Articles of Organization with the business name including "LLC"). The CSR questioned the customer about the change in business structure and ended up opening a whole new account for this whole new entity (closing the sole prop business account).

That's probably the point...oftentimes they are trying to hide something. Your naysayers simply do not mind helping them and they are willing to take the financial and compliance risks involved.

Unlike retail, in banking, the customer is not always right.

I'm going to be devil's advocate here - The account is wholly owned by John Doe. Under the UCC a check payable to "John Doe Construction" is no different than a check payable to "John Doe.". The account is going to show "John Doe" as the sole owner so how's the teller going to be confused? Or how is the owner going to embezzle from himself?

If we have reason to believe he's under reporting his income we can file a SAR. We don't work for the IRS so why treat our clients like criminals?

I don't allow split deposits on any commercial account but I'm not sure if that's conviction or tradition.

Not certain what bearing it would have on this issue, but I would like to see a citation for that.



I've been a teller. You get confused when you are supposed to make distinctions when there are no apparent differences. Saying we don't split deposits on business accounts is a rule that can be understood and followed. It also pushes the customer toward the mechanism outlined in Accounting 201 for obtaining any cash necessary to operate his business: Write a check.



Generally it is employees who embezzle money. Sole proprietorships may have one owner, but they oftentimes have several employees.



Banks that file SARs on activity they could easily eliminate are complicit in that activity. Besides, maintaining good practices is easier than filing SARs.

Thank god I don't operate under a "dba" I get to do what I want with my checks...

LOL!

That is exactly how hard it is for the customer to get around all of this supposed inconvenience: They can ask their customers to make the check payable to them individually then they can do whatever they want to...

Although this is a slightly different situation, see this story published in The Tennessean, Nashville, TN.

Law firm sues Regions after paralegal allegedly deposited embezzled money
http://www.tennessean.com/apps/pbcs.dll/article?AID=2012308220144

Gee, a law firm with inadequate controls over its accounts receivable. Like that couldn't happen, right?

My individual favorite was a CPA firm.

Secretary was sent with checks payable to the bank in order to make loan payments on their line of credit. (No notation on memo line.) Instead, she purchased cashiers checks payable to herself, her friends, and her creditors showing the firm as the remitter.

My overall favorite is doctors' offices...oh, there's some really smart people there.