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#2151965 - 11/01/17 06:36 PM SAR????
slicehead Offline
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We have a customer that is building a house. The customer has come in at various times and requested larger amounts of cash 4-8K He has indicated he is using the cash for the building of the home. We can see the home from our Branch so we know the house is being built. Recently, he closed a loan and deposited the loan proceeds into his checking account. He indicated he will be coming in the next 4-6 weeks and withdrawing cash on each Friday to finish construction. Do we file a SAR since we know where the money is going?

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#2151970 - 11/01/17 06:49 PM Re: SAR???? slicehead
Daisy Doodle Offline
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We do file on these, unfortunately, if they are building an entire home with cash, because, first, they tend to alert for structuring for the duration, and then the $$ amounts begin to add up fast. We figure the general contractor on the project may be forgetting to include these amounts on his tax returns and the homeowner may be getting a little discount for helping him do that.

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#2151976 - 11/01/17 07:16 PM Re: SAR???? slicehead
HappyGilmore Offline
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Pulling people out of the ditc...
1. building a home that you can see evidence of progress
2. deposited loan proceeds in your bank
3. has been up front with you that he is paying cash
4. has been up front that he will make withdrawals every Friday for the next 4-6 weeks (and many contractors pay their employees weekly, and also a draw against building supplies for next week)

what, exactly, are you suspicious of that makes you want to file?
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#2151978 - 11/01/17 07:24 PM Re: SAR???? HappyGilmore
slicehead Offline
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I agree with you. I am not sure it is our business whether he is paying the subcontractors cash and whether or not they are reporting it......is it?

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#2151984 - 11/01/17 07:53 PM Re: SAR???? slicehead
bcompliance Offline
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Just because there are weekly withdrawals in amounts of $4-8k doesn't mean you need to file a SAR. If their explanation makes sense and you can see the home being conducted, make a note of why you aren't filing and move on. It sounds like the customer was pretty up front and honest. If you feel the need, ask him to explain the process a little bit more, but as Happy pointed out chances are he's paying for draws as work is completed/supplies/payroll.
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#2151992 - 11/01/17 08:16 PM Re: SAR???? slicehead
RockChucker, CAMS Offline
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In this case I would only be concerned if it appears that he is structuring. Its not your job to determine if the other parties are paying their taxes or not.
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#2151994 - 11/01/17 08:23 PM Re: SAR???? slicehead
#Just Jay Offline
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Just because you can see the home being built doesn't make the withdrawals ok. It is not the purpose or use of the funds, it is about the manner of which the funds are being moved.

I think in order to remove any doubt, you need to be aware of the costs of construction in your area or at least this home, the rate and speed of completion, does 4-8k a week seem like enough to cover those costs on a weekly basis, and how are the various subs actually being paid from the GC, and so on, or is he pulling that money each week to stockpile and then hand over larger sums as payment at the time the work is complete.

In my market, rough framing alone could run 25-35k, and be completed in under 2-3 weeks. If the rate of withdrawals to cover that would take 4-6 weeks, then I have a structuring issue potentially, regardless of how the funds will be paid/used.
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#2151997 - 11/01/17 08:30 PM Re: SAR???? slicehead
Daisy Doodle Offline
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Southern U.S.
Well, you guys can do what you want in this instance, of course. But in my training with various law enforcement panels, we have been encouraged to file on activity where the LIKELY purpose for the cash is tax evasion. I realize some choose to decide they have no knowledge of the tax evasion. But it is certainly not a normal way for a residential homebuilder to conduct business.

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#2152018 - 11/02/17 03:31 AM Re: SAR???? slicehead
JacF Offline

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We need to stop vilifying cash.

You have a verifiable lawful source of funds and a verifiable lawful use of funds. Unless you pick up on structuring, note your review and move on.

Your transactional reach ends with the buyer's withdrawal. Even if the contractor is not reporting his income correctly (and all any of us can do is speculate about this), its out of your purview.

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#2152019 - 11/02/17 11:52 AM Re: SAR???? slicehead
bcompliance Offline
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But in my training with various law enforcement panels, we have been encouraged to file on activity where the LIKELY purpose for the cash is tax evasion

I could see doing that for deposits into the bank, not withdrawals to pay a contractor for building a home. You have no idea what that contractor is doing with the funds unless you have their account.

It really comes down to if you think the customer is intentionally structuring to evade the filing of a CTR. In my opinion, they are not and have provided sufficient evidence as to why they are not.
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#2152033 - 11/02/17 01:46 PM Re: SAR???? slicehead
slicehead Offline
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My dilemma is this: I firmly believe that there is no way I can consider this as suspicious activity. I know the funds are being used to construct the home. I can see this and I have been told this. I do believe he is taking the sums of $ out in increments that avoid a CTR. I am sure the customer is aware of this information. So....does the belief that he is structuring the withdrawals of his own money trigger the SAR?

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#2152037 - 11/02/17 02:16 PM Re: SAR???? slicehead
thomasj Offline
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Originally Posted By slicehead
...... I do believe he is taking the sums of $ out in increments that avoid a CTR.
.........does the belief that he is structuring the withdrawals of his own money trigger the SAR?


These two statements indicate that you should file a SAR. Suspicion of structuring transactions to avoid a CTR must be reported on a SAR. Unless you can alleviate that suspicion and feel comfortable defending it to an examiner, file the SAR. Ultimately it is going to be you sitting across from an examiner.
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#2152038 - 11/02/17 02:26 PM Re: SAR???? slicehead
Wildcat Rampage Offline
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Kentucky - Home of the 8 time ...
Don't you have receipts to match the construction draws? Do you have construction inspection reports? I would think that there should be sufficient information to justify or contradict your position.

However, if you have a belief that it is structuring, then you should file. I file for structuring whenever my software points it out on the better safe than sorry philosophy.
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#2152062 - 11/02/17 03:19 PM Re: SAR???? slicehead
thomasj Offline
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Unfortunately, it is most often easier to defend a decision to file than it is a decision not to file, with fewer and less severe consequences if your defense fails. Keep in mind that if you file, you will have the burden of continuing activity reports until the project or activity stop.
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#2152092 - 11/02/17 04:18 PM Re: SAR???? slicehead
JacF Offline

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Quote:
But in my training with various law enforcement panels, we have been encouraged to file on activity where the LIKELY purpose for the cash is tax evasion

I could see doing that for deposits into the bank, not withdrawals to pay a contractor for building a home. You have no idea what that contractor is doing with the funds unless you have their account.

To build on this...

The likely explanation for this customer's behavior is that he is building a house- the evidence is there. The customer does not have an obligation to pay taxes. Taxes are the builder's responsibility, which he may honor or evade, regardless of the payment methods that he accepts. The bank has no means of looking into the money once the builder has it, and is not a participant in any of the builder's transactions.

That's why I say this is beyond the bank's transactional reach.

On the other hand, I agree that if you determine that structuring is taking place, you need to file. But that's true regardless of how the money is used.

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#2152099 - 11/02/17 04:32 PM Re: SAR???? slicehead
Daisy Doodle Offline
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My take is the LIKELY reason for our customer's CASH behavior is the builder has discounted the price of the project if he gets paid in cash. We have plenty of homebuilding going on amongst our customer base at any given time and very, very few pay for the entire project in cash.

I believe the customer is in full collusion with the builder. And it seems to always end up looking like structuring, so you end up filing SARS regardless. Typically one or two SARS and it's done for us. Easy decision in our bank.

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#2152106 - 11/02/17 04:40 PM Re: SAR???? slicehead
rlcarey Online
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Galveston, TX
Or - after the first such SAR, you just give the customer a cashier's check for the balance of there account.
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#2152117 - 11/02/17 05:13 PM Re: SAR???? slicehead
edAudit Online
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edAudit
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You are here
Since you have no indication of an illegal transaction why would you close the customers account?

or even file a SAR.?

Last I checked

ยง 5103. Legal tender
United States coins and currency (including
Federal reserve notes and circulating notes of
Federal reserve banks and national banks) are
legal tender for all debts, public charges, taxes,
and dues. Foreign gold or silver coins are not
legal tender for debts.

https://www.gpo.gov/fdsys/pkg/USCODE-201...apI-sec5103.pdf
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#2152120 - 11/02/17 05:17 PM Re: SAR???? slicehead
rlcarey Online
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Ed - I meant if they choose to file - not arguing for that.
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#2152138 - 11/02/17 06:09 PM Re: SAR???? slicehead
HappyGilmore Offline
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Pulling people out of the ditc...
I do believe he is taking the sums of $ out in increments that avoid a CTR.

this is interesting, when taken with the other statement that he is only withdrawing once per week, and plans only to withdraw once per week for the next 4-6 weeks. Because at a minimum he should be paying the contractor enough each week to cover his costs of labor and material, and withdrawing smaller amounts to avoid a CTR means that the contractor seems to be getting shorted his payments, and only 4-8k per week. If they were doing to structure, wouldn't it be a consistent amount weekly, likely at the higher end? Can't reconcile these two items and come up with anything that to me looks fishy.
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#2152173 - 11/02/17 07:46 PM Re: SAR???? slicehead
burkemi Offline
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I actually had a very similar situation just after I started working at the bank. I was the guy who made the deposit and subsequent withdrawals. Only once did I ever have to make a withdrawal of more than 10k. The rest ranged anywhere from a couple hundred to 4 or 5k. Obviously, I have no idea whether a SAR was filed on me (had never even considered it)...heck, I didn't know what a SAR was. I can tell you, at least for my story, there was nothing underhanded occurring. I just felt better having my money and parting with only the amounts I needed as I needed.

I agree with some of the others - I don't see anything suspicious unless you feel there is deliberate structuring.
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#2152220 - 11/03/17 03:27 AM Re: SAR???? slicehead
JacF Offline

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Quote:
My take is the LIKELY reason for our customer's CASH behavior is the builder has discounted the price of the project if he gets paid in cash.

Discounts are not illegal. And Ed has posted the cite demonstrating that cash payments continue to remain legal.

Any speculation about why the builder might offer a cash discount is just that- speculation. What the builder does or does not do with the cash is outside of the bank's reach.

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