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#2030575 - 07/29/15 07:40 PM Hiding funds from Garnishment and........
HarleyGirl Offline
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HarleyGirl
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Looking for advice:
A business instructs bank to wire/close their accounts. They offered the reason, attempting to prevent Garnishment from seizing the funds. The wire was sent to one of the Officers of the Corporation, as an individual.

My opinion:
I do not believe any BSA rules were broken, and no further action is necessary on my part. Morally, I believe what they did was wrong. I am not knowledgeable of any law that would prevent a person from intentionally hiding assets for the purpose of avoiding to pay a judgment/Garnishment against them.

Your advice?

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#2030593 - 07/29/15 08:00 PM Re: Hiding funds from Garnishment and........ HarleyGirl
John Burnett Offline
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I agree, no laws were broken. However, if the business is a corporation and the funds were wired to an individual officer of the corporation, and a creditor learned of the transaction, the creditor could attack the transfer as a breach of fiduciary responsibility by the officer, and ask a court to allow the creditor to go after the officer directly (piercing the corporate veil) for the debt.

And by the way, the creditor could also ask the court to find that the bank was on notice of the breach based on its knowledge of the purpose of the transaction.

If the transfer amount was substantial, I'd be contacting bank counsel to discuss the transfer.
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#2030676 - 07/30/15 12:17 PM Re: Hiding funds from Garnishment and........ HarleyGirl
Elwood P. Dowd Offline
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Your customer is guilty of naiveté in the first degree. A judge would either a) demand reimbursement by the officer or b) just go after the officer.

Fortunately, there is no text box on the SAR labeled: "customer acted stupidly."
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#2030682 - 07/30/15 12:33 PM Re: Hiding funds from Garnishment and........ HarleyGirl
BC78a Offline
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I try not to disagree with Mr. Burnett and Mr. Pegasus, but this time I need to.

My understanding of the SAR requirements is that that a SAR is required when the transaction may involve potential money laundering or other illegal activity.

If the garnishment has been issued and is court ordered, actions to hide the funds is illegal (in my opinion), and as such is subject to a SAR.

Last edited by BC78a; 07/30/15 12:34 PM.
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#2030688 - 07/30/15 12:52 PM Re: Hiding funds from Garnishment and........ HarleyGirl
MagicCity Offline

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MagicCity
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I agree with BC78a.
I would file in this circumstance.

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#2030690 - 07/30/15 12:58 PM Re: Hiding funds from Garnishment and........ BC78a
Elwood P. Dowd Offline
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There is no law against "secreting assets." It's purely a civil matter; e.g. husband hiding assets from wife in a pending divorce. You're not going to file a SAR on that, at least not a required SAR.

Bankruptcy fraud? There are laws against that.
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#2030784 - 07/30/15 04:06 PM Re: Hiding funds from Garnishment and........ HarleyGirl
BC78a Offline
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BC78a
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Ken,

I agree there is no law against hiding money in a divorce, unless the court is involved. If the garnishment is a result of a court order, moving the assets is a fraud against the court, and would require a SAR.
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#2030785 - 07/30/15 04:08 PM Re: Hiding funds from Garnishment and........ BC78a
Elwood P. Dowd Offline
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Contempt of court, yes. A crime, no.

You could prove your point pretty easily with a citation to a criminal statute prohibiting the practice.
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#2030995 - 07/31/15 01:29 PM Re: Hiding funds from Garnishment and........ HarleyGirl
BC78a Offline
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In NYS Contempt of court can be civil or criminal:

http://www.nycourts.gov/forms/matrimonial/PS-ContemptOrder-Affidavit.pdf
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#2031008 - 07/31/15 02:04 PM Re: Hiding funds from Garnishment and........ BC78a
Elwood P. Dowd Offline
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The form linked doesn't contain a citation that would be probative. However, if a member of your staff is legally fluent enough to conclude that the customer has committed " criminal contempt" , then you could consider a SAR mandatory and add that label to the "Other" check box.

We are a few steps away from the question that actually started this thread, but it would be a long journey for most bankers.
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#2031049 - 07/31/15 02:57 PM Re: Hiding funds from Garnishment and........ HarleyGirl
HarleyGirl Offline
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HarleyGirl
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Fraudulent Conveyance/Transfer comes to mind here:

A transfer will be fraudulent if made with actual intent to hinder, delay or defraud any creditor. Thus, if a transfer is made with the specific intent to avoid satisfying a specific liability, then actual intent is present.

Thank you everyone for your time and input. This has proved very helpful in our final decision.

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#2031052 - 07/31/15 03:01 PM Re: Hiding funds from Garnishment and........ HarleyGirl
Elwood P. Dowd Offline
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If a fraudulent transfer was a crime...never mind.
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#2031123 - 07/31/15 05:31 PM Re: Hiding funds from Garnishment and........ HarleyGirl
rlcarey Online
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Ken,

Try as you may, you will never succeed in preventing people from making a mountain out of a mole hill based purely on hearsay. If they thought that they were aiding and abetting a criminal activity, why did they agree to the wire in the first place.
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#2031416 - 08/03/15 08:16 PM Re: Hiding funds from Garnishment and........ HarleyGirl
Naise Offline
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Posts: 91
One of the reasons I left BSA after only a year was because we had discussions like this in our SAR committee regularly. I assumed I didn't have the moral compass that was required for BSA.

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