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#2256647 - 07/13/21 08:19 PM Cash Collateral
Anonymous
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Customer wants to use cash (actual cash) for a line of credit. Officer said cash will be kept in collateral vault like other collateral. Customer doesn't want to use a CD b/c "he has already paid taxes on it" and doesn't want it "reported". My question is, would a CTR be necessary? There would be no actual "cash transaction". I already know he is avoiding a CTR and what needs to be done on that front, but the need for a CTR is what is in question.

Thanks

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#2256648 - 07/13/21 08:29 PM Re: Cash Collateral Anonymous
ColoradoAML Offline
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So the physical cash will be held in a physical vault, not credited to an account?

If that's the case, I would not file a CTR because as you said, it sounds like no transaction is taking place.

A follow-up question for people who are more savvy than I am: If it turns out this person is evading taxes, or these are proceeds of a crime, may the bank be criminally liable for aiding the customer to launder their money?

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#2256649 - 07/13/21 08:31 PM Re: Cash Collateral Anonymous
rlcarey Offline
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You are going to safe keep actual cash as collateral?? I would tell the customer to go find another bank. They definitely have a screw loose.
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#2256697 - 07/14/21 06:24 PM Re: Cash Collateral Anonymous
John Burnett Offline
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Or a felonious motive.
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#2256717 - 07/14/21 09:07 PM Re: Cash Collateral Anonymous
RockChucker, CAMS Offline
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The Country
This doesn't pass the smell test on the surface. As far as a CD goes, they only pay taxes on the gain of interest on the CD not the principal amount. Sketchy sketchy
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#2256737 - 07/15/21 04:08 PM Re: Cash Collateral Anonymous
HappyGilmore Offline
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Pulling people out of the ditc...
if they have the cash to pledge as collateral for a line of credit, why do they need the line of credit? just tell them use the cash and be done.

nothing about this sounds like it is on the up and up...
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#2256740 - 07/15/21 05:15 PM Re: Cash Collateral Anonymous
ACBbank Offline
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This looks like an asset backed line of credit to me. Asset backed LOCs are used quite often by wealthy individuals who don't keep a lot of cash on hand and don't want to incur a taxable event (For example, selling a security position and triggering capital gains).

I rarely see it done with physical currency though and I agree that part is very unusual.
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#2256743 - 07/15/21 05:16 PM Re: Cash Collateral Anonymous
praBSA Offline
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Posts: 260
Agreed with all the above.

I've seen banks take some interesting collateral before though. At my last bank, we took 10,000 ounces of silver bars as collateral for a loan so that the shop owner could buy more silver. Was very interesting having that all stored in a vault on site.

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#2256745 - 07/15/21 05:31 PM Re: Cash Collateral Anonymous
BrianC Offline
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Don't forget to have it appraised.

I had a client that took silver bars as collateral only to find out that they had "silver plated" bars when the loan went into default.
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#2256754 - 07/15/21 06:14 PM Re: Cash Collateral Anonymous
praBSA Offline
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That was the last bank I was with. They had it xray'ed to be sure. They also valued it at a 20 year low, which was like $4/oz. Customer was fine with it, he just needed the funding quick. Was a good loan for him though, silver was at about $15 at the time, its now much higher than that.

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#2256762 - 07/15/21 07:18 PM Re: Cash Collateral Anonymous
one deer Offline
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Posts: 69
Any where but work
Buckets of quarters, there were not as many as they said, DUH.

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#2256768 - 07/15/21 08:36 PM Re: Cash Collateral Anonymous
Anonymous
Unregistered

SAR!!!

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#2256800 - 07/16/21 03:55 PM Re: Cash Collateral one deer
Anonymous
Unregistered

LOL. Now we know why there was a "coin shortage" They were all in your safe box.

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#2256837 - 07/17/21 07:44 PM Re: Cash Collateral Anonymous
Richard Insley Offline
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Toano, VA
When I was a bank examiner (long, long, long ago), we criticized a bank for maintaining a small balance loan or no-balance LOC secured by 40,000 silver dollars. There was zero risk of a loss on the loan, but the customer was obviously using this arrangement to avoid paying for safe deposit or safekeeping services. The loan yielded next to nothing, safe deposit/safekeeping income was lost, and there was a question about the bank's insurance coverage for all the bags of silver dollars.
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#2256838 - 07/18/21 04:16 PM Re: Cash Collateral Anonymous
Happy Birthday Andy_Z Offline
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Ditto the comment that it's only a part of the interest income that would be taxed. If the loan defaults and you have zero loss because of the collateral - you just assisted in laundering money for him. KYC! I'd also do a good job of counting and bagging the cash in a tamper proof bag.
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#2256839 - 07/18/21 04:22 PM Re: Cash Collateral Anonymous
Happy Birthday Andy_Z Offline
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Oh, forgot to add that there was one instance where I saw a situation like this. We had a customer who closed many CDs because his religion said it was a bad thing. We actually had several customers doing this. We didn't mind not paying interest but you also have less of a "lock" on the funds. I think the religion was Riba. In that case you can explain why the funds were non-interest bearing.
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#2256841 - 07/18/21 04:40 PM Re: Cash Collateral Anonymous
ACBbank Offline
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New York City
Some additional thoughts here - We don't know the actual cash amount or anything about the customer. Accordingly I'm not quite sure we can opine on whether this could be money laundering or not. If it's a small amount of cash, and I know different people view "small" differently, I wouldn't be so concerned about money laundering.

It it's over $10K a CTR will be filed and possibly a SAR (Along with a call to FinCEN). If this is someone's attempt at laundering money, it's amateur at best.
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