If you see that a client who owns a cash-intensive business deposits a large amount of cash into their personal account (e.g. more than $100K within rolling 12 month) do you automatically assume possible tax evasion and file a SAR, even upon the fact that the cash is the client's payroll from running the business? If opting out of filing a SAR, what would be a reasonable justification for the regulators? Last I checked, it's not illegal to pay employees/officers in cash. Also, are banks mandated to file a SAR if we don't see any tax payments being made from individual accounts stacking up with cash?

How are other FIs handling this?

"do you automatically assume possible tax evasion and file a SAR,"
- No, each situation is fact dependent and may not be suspicious at all. That being said I would recommend some follow-up to get more information about the nature of the business and then document why you did or did not file based upon what you discover.

"Also, are banks mandated to file a SAR if we don't see any tax payments being made from individual accounts stacking up with cash?"
- No, there are circumstances where you would not see tax payments, in fact I would be interested to know if banks spend the time and resources trying to determine if a tax payment was made on an account. (We do not)

Agreed

it is equally not illegal to pay taxes from an account at another bank.

So...you ask the customer for the source of the cash and he says it's from the business and how he compensates himself. That's good enough (for a not filing decision)? We get this scenario fairly often.

It's an explanation for the activity. Whether or not it is a "good enough" explanation will depend on other factors as well. Is the cash normal and expected for the business? Are there any regional or cultural preferences toward dealing in cash that make sense of this recurring scenario? What else is going on throughout the customer relationship? These are the types of questions you'll want to consider as you evaluate each case. And you'll probably find that the explanation you're given is adequate in some situations, but not in others.

This ^^^^

There are few automatic SARs. I would also see how the cash was deposited: Was it structured? Did your system miss the structure? (most important).

The shop owner has a business account with us as well. But all cash claimed to be "salary/wage" or "drawdown" (ranging from $4k to $6k; 2 to 4 sessions per month) is going into his personal account. No cash observed in the business account. Suspicious enough?

I think you are building a case, BigBanknoob, for filing. When there's apparently little to no cash deposited to the business and significant cash amounts -- purportedly compensation or draws -- going into the owner's account, my SAR radar goes off. Given the many alternatives to cash payrolls, a bank should be seeing fewer and fewer situations in which compensation is paid in cash. There comes a point at which it is just too costly to dig and dig further to try to justify a transaction pattern like this, and filing the SAR may be the most reasonable decision. What you don't want is an examiner calling into question your SAR decision-making. The "Manual" notwithstanding, if your "no file" decisions appear to be weakly documented, you're inviting trouble.

If you see that a client who owns a cash-intensive business deposits a large amount of cash into their personal account

If it is a cash intensive business does the business bank elsewhere ?

A cash intensive business where there is no cash (and no cash into a personal account) may be problematic in itself.

Yes. They are banking elsewhere but based on the inquiry, all cash proceeds are being deposited into the owner's account. No cash into any of the business accounts. If we were to file, what would be the basis of suspicious activity?

Abnormal activity for a business owner.

This seems unusual, but I've also seen personal account deposits followed by transfers to business accounts to simply avoid fees.