We have a customer that owns a music business - lessons, instrument sales and rentals. We are in a smallish town - not a big city. Back to January, they started depositing in cash $80,000 - $86,000 monthly so about $420,000 for a 5 month period of time. The account officer says they have expanded to 2 stores and the website says they have leveraged social media with strong Internet sales. (Not cash...) A coworker talked to a music store in this same town and they thought it unusual that that much cash was involved. They dealt with checks and credit cards for the majority of their transactions. This person also said it was hard to compete with the Amazons and EBay types of online sites. So these two companies, same market are so different and ultimately this kind of cash (sales?) is out of place. Welcome comments, suggestions... Thank you.

Did anyone ask your customer for a reasonable explanation? I'd start there. If you don't get one to offset the suspiciousness of it, file a SAR.

Sounds odd that they would have so much cash. Like PQ said, its time to have another conversation with your customer.

The officer says she "knows" the customer and the fact that they had opened another store was enough of an explanation.

Considering your location, I would need more than that. That is a lot of trombones.

Exactly my questions but don't know how to get more! (Push-back)

are they further making deposits by checks and using merchant services for credit card deposits too? or simply cash deposits only? and average of $4k per day in cash...from a music store in a small town...yeah, something not adding up...

provide a list of questions to the account officer to ask, or call and ask them yourself...many a bank has been fined, or worse, for issues caused by "known" customers.

No checks! And the credit card deposits go to another bank so we just have the debits with nothing to compare them to. CTRs are at a minimum and for slightly over the threshold.

Where is the money going?

A small portion goes out: $80,000 cash in/$28,000 goes out for the month. The majority of checks, it appears go to people that are selling their instruments - based on the memo line - small amounts ($100-.$1000). Slightly larger checks $1200-8000 are checks from the business to themselves at a different bank.

Oh - and $12-16,000 to the Department of Revenue monthly.

You sure that they are not operating a medical pot dispensary out of the back room or something? This really does not add up.

First, I also agree that asking the customer for more information is the best place to start.



To this though, is it possible that the bank who does their merchant processing requires the deposits go to them, so they send the money to that bank, withdraw cash, and bring the cash to you guys? Still odd that they aren't just writing a check to you from that bank, but maybe there's some rule at the other bank they're trying to avoid. Long shot, but just what hit me.

Have you been in the store (or at least called them as a shopper) to understand their business model? And what did they disclose as their projected cash activity at account opening?

I ask because I've personally been in a few music stores that are unbelievably packed and full customers from hours away. In fact, there is a music store less than an hour from me that boasts of making over a million in a day - and I don't doubt it as they are a huge player in the industry (though most of their sales are online/phone and not cash). I also once bought a pricey guitar (with cash) at a store that was pretty busy on a weekday and I could easily see them pulling in the kind of cash you mentioned. Point is that there is money to be made in this industry, but large amounts of cash isn't typical and I have seen many more music stores go out of business than those that are wildly successful.

If this store has a cash model where they give a discount for those who pay in cash, then I guess it could add up - especially since you said they pay $12,000 - $16,000 to the Department of Revenue monthly. However, I think that would be rare and I would want to understand their business model myself before not filing a SAR. Like Happy said, relying on the "known customer" excuse doesn't end well in many cases.

The officer has visited them. I have asked her to ask a few questions about the cash. Their website as mentioned above, talks about leveraging their social media presence. Interesting about the cash discount angle however, one of my concerns is that the cash amounts are consistent. Not much variance in the amounts each month. I might have to take a field trip and look at them myself to see if I can get a feel for the activity but again big sales - cash? From what I have been reading, this is not a typical business model.

This!! We're starting to see customers open up dispensaries and attempt to run the cash through their existing business relationship. We had to shut an account down just last week for this reason.

CompliantOkie - How did you find out that they had a dispensary???

We had a music store account at one time that was fairly cash intensive as well. One of their specialties was buying and selling classic guitars either privately or at auctions or estate sales. A ton of internet sales, but many of their clients paid in cash in person too, and they appeared to have the documentation/receipts and tax returns to support the business level. Site visits didn't show anything other than a consistently busy store of peeps ogling over the guitars. Cash often increased near Christmas and June, for father's day.

We keep an eye on the list of state licensed dispensaries and noticed the addresses were next door. Inquired to the owners and they confessed.

We had a rule. In order to bank cash intensive customers (other than Phase I customers)- either we had the whole relationship or we had nothing. You are flying blind from a monitoring perspective to do otherwise and there are few legitimate business reasons to run different revenue streams (cash , checks, cards) through different banks.

Randy, what did your monitoring look like to make sure your cash intensive customers didn't bank elsewhere (if you can share)?

Since all cash intensive customers required additional due diligence, a normal review of account activity would usually tell the tale. In this case you have a retail business that neither runs checks or card payments through your bank.