A police officer deposits cash in excess of $10K on behalf of a local county drug task force into a law firm's IOLTA account.

In my opinion, a government official conducted a transaction on behalf of a government agency; therefore, it's an exemptible transaction. However, since it was done into a law firm's IOLTA account, I'm trying to find purposeful reasons for doing it this way and verification a CTR is not needed.

Thoughts?

Transactions are not exemptible, customers are exemptible. Your IOLTA is not allowed to be exempt.

Ineligible Businesses
Certain businesses are ineligible for treatment as an exempt non-listed business (31 CFR 1020.315(e)(8)). An ineligible business is defined as a business engaged primarily in one or more of the following specified activities:
• Serving as a financial institution or as agents for a financial institution of any type.
• Purchasing or selling motor vehicles of any kind, vessels, aircraft, farm equipment, or mobile homes.89
• Practicing law, accounting, or medicine. **********

And why would the cash not have been deposited into an account for the county drug task force, with a check then issued to the law firm as appropriate? IMHO, not a good audit trail . . .

I am aware a law firm is not exemptible nor is a transaction. The transaction benefits an entity that meets the critera to be exempted (Phase I government entity). Based on guidance related to IOLTA's, a CTR would be required on the law firm's client (owner of the cash funds), along with the law firm when cash transactions exceed $10K into an IOLTA account. Both would be beneficiaries (on behalf of) with an individual listed as conductor. State Bar/TIN would not be listed as a beneficiary.

From your response, I presume you would file a CTR (law firm and government entity - drug task force - as beneficiaries, with police officer as the conductor) because the law firm would be listed as a beneficiary, which is a non-eligible entity for exemption. Correct?

Has anyone else seen this type of activity at the FI? Seems odd.

Right. I would have to assume any deposit into an IOLTA would benefit the law firm.

Thanks!

I'm not sure why you'd name the law firm as a beneficiary. In most cases, the funds in an IOLTA belong to the client's of the law firm. What I don't understand is why monies from a drug task force are even being placed in an IOLTA. Seems like an odd arrangement to me.

The IOTA fund deposit should benefit the Client of the law firm and not necessary an exemptible entity if it was "on behalf of a local county drug task force" it should have gone into a state or local account and not an IOTA (unless the local taskforce was a client of the law firm). sorry but it appears you have a mess (not necessarily caused by your bank)

Doug kind of beat me to it while I was tryin to get my thought together

But doesn't the law firm take its earnings from the IOLTA as they perform legal work and the fees are earned? So their income is actually in the IOLTA account until they move it to their operating account? How do they not benefit from that?

the fees still come from the client even if it is a portion of the IOTA funds the law firm should write a check for services

There is something very wrong with this scenario. I would be placing a call to the head of the county drug task force and ask them what is going on.

FIN-1989-R005

See Number 3 Scenario in this guidance. Says name the lawyer and the client.

Two issues in the OP. First, why would a member of law enforcement be making a cash deposit to an account of a law firm? That part is more than puzzling.

But, since the deposit was made to the IOLTA, the law firm and its client(s) on whose behalf the cash was deposited at named in the CTR. And, since a CTR is filed, the member of LE should be identified as the transactor, using his LE ID info.

In reading the FinCEN ruling, only cash deposits into an IOLTA are addressed. I've also reviewed IRS form 8300 which also only deals with a bsuiness receiving cash from someone. If a lawyer comes in and withdrawals a reportable amount from an IOLTA account, are we required to report the client information as we would for a cash deposit into an IOLTA account?

Yes and I would be filing a SAR and likely notifying the BAR association or whatever governing board over IOLTAs in your State. Almost every State that I know would prohibit that transaction as all withdrawal have to be documented via a check.

Thank you.