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#613562 - 09/14/06 08:39 PM File a SAR ?
lisa Offline
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Joined: Aug 2001
Posts: 264
Gainesville, TX USA
One our our customers has been running his "self-employed" business transactions through his personal savings account. All of his deposits have been cash: $5,700; $5,000; $2,300 and $5,000. I do not suspect structuring because they are weeks apart. However, he appears to be abusing the government system by (a) not paying social security on his workers (b) not paying franchise tax and (c) avoiding income tax reporting. Part of me wants to file a SAR; but the suspicious activities identified under item 35 does not seem to fit this situation. Any thoughts? Also, what does (o) Misuse of Position or Self Dealing represent?

Thanks,

Lisa

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#613563 - 09/14/06 08:47 PM Re: File a SAR ?
CantBeShocked Offline
Gold Star
Joined: Apr 2006
Posts: 260
MS
A few questions to think about - is his business just him or are you sure he actually has employees? Are their debits out of the savings account that would indicate he is buying supplies or paying employees ? Does he have another account (checking) that has deposits but not cash - i.e. he deposits payments by check into the checking account but hides the cash in his savings?

On the other hand, just because he does deposit cash into his savings account does not indicate that he is necessarily avoiding taxes. You could keep all of your self-employment income on hand, never deposit the money, and still be an honest US citizen who pays taxes.

No help I know - but some additional questions / issue to think on.
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#613564 - 09/14/06 09:03 PM Re: File a SAR ?
Spenser Offline
Member
Joined: Apr 2006
Posts: 52
Washington state
If you want clarification on the SAR categories, this website has an excellent list. Go to 1) Bankers Tools
2) AML/BSA 3) SAR-BOL's Research Guide to SAR 4) Understanding the Suspicious Activity Categories. I used the list a training tool for operations staff.

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#613565 - 09/18/06 04:25 PM Re: File a SAR ?
Dip Offline
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Dip
Joined: Mar 2005
Posts: 6,298
San Diego, CA
This is structuring...changing his transaction to avoid any sort of government reporting. IE: running business cash through the personal accoutn to avoid income tax reporting and what all else... We have a customer doign the samr thing. We filed a SAR and will continue to do so every 90 days so long as he keeps it up. We also elevated him to high risk status and monitor him due to possible money laundering or MSB risk.

No question here-- FILE! It IS structuring.
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#613566 - 09/18/06 04:37 PM Re: File a SAR ?
MagicCity Offline

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MagicCity
Joined: Apr 2003
Posts: 3,003
Fort Lauderdale, Florida
I am not sure this would be structuring, if it is weeks apart and the amounts fit the nature of the business for the time periods in question.
I don't believe that we have all the information on the customer to make a decision on any other violations.
I would however chat with the customer and advise him that he must open a business account and then perhaps more information would be forthcoming on the business and its activities.
Based on that information a SAR may or may not be warranted.

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#613567 - 09/18/06 05:46 PM Re: File a SAR ?
Dolly Nugent Offline
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Dolly Nugent
Joined: Nov 2000
Posts: 1,820
Southern California
Did you consider that he may have his "business" account at another financial institution? Perhaps the money being deposited to the savings account is him paying himself.

Sounds like some CDD is needed here. Someone needs to sit down with the customer and ask a few questions. Never assume anything. The customer may have a perfectly reasonable explanation for the activity.
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#613568 - 09/18/06 06:07 PM Re: File a SAR ?
Dip Offline
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Dip
Joined: Mar 2005
Posts: 6,298
San Diego, CA
True, the funds may be legitimate, but by depositing the cash from the business directly into the personal account, the revenue from the business probably isn't being reported accurately, thus making a difference on income and tax reporting. When you file the SAR with the info you have, the government can do further research if it thinks it is worth it.

The customer shoudl be depositing the cash into the business account and then paying himself by check so there is a clear line on the business activities. When I discussed my customer with the OCC last week, the thought from the OCC was, why does the customer have the business account at a different bank? The OCC's thought was that we shoudl have the entire relationship or no relationship in this case (due to the ability to effectively monitor). The OCC did confirm a SAR was the correct action to take and made sure I knew to continually file as long as the activity was allowed to continue.
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#613569 - 09/18/06 06:58 PM Re: File a SAR ?
devsfan Offline
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Joined: Jun 2004
Posts: 1,927
NYC
IMO, no one, including a bank examiner, should suggest that a customer must have all accounts with the same bank. There are many reasons why a customer would want to use more than 1 bank.

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#613570 - 09/18/06 07:25 PM Re: File a SAR ?
MagicCity Offline

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MagicCity
Joined: Apr 2003
Posts: 3,003
Fort Lauderdale, Florida
Multiple banking relationships is the norm, not the exception.
It might make it easier for the IRS but it is not reality.
I do not believe that as bankers we should be filings SARs on customers so "the government can do further research if it thinks it is worth it."
IMHO.

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#613571 - 09/18/06 09:03 PM Re: File a SAR ?
Anonymous
Unregistered

I agree with you Magic City. First of all if this is a sole proprietorship the business and the person are the same in the eyes of the IRS. How do you know the cash going into his savings account is 'business' related? Even if it is, there is nothing to indicate to me that he is 'not paying taxes'. He could very well be filing/paying taxes on everything he should.

As for having all accounts at one bank, I agree that regulators cannot dictate that to a bank. As previously stated there are many reasons to have legitimate multiple bank relationships.

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#613572 - 09/19/06 12:10 AM Re: File a SAR ?
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 78,901
Galveston, TX
"True, the funds may be legitimate, but by depositing the cash from the business directly into the personal account, the revenue from the business probably isn't being reported accurately, thus making a difference on income and tax reporting. When you file the SAR with the info you have, the government can do further research if it thinks it is worth it."

Dip - I concur with the above that we don't have enough information and this statement is pretty bold. The original poster stated that the person was "self-employed" . Being self-employed myself, I do not have a "business account" and run all of my transactions through my personal banking account. Suggesting that practice automatically leads to the assumption of tax evasion or other accounting irregularities is ludicrous. I think you were also dealing with an overzealous examiner unless there were more facts involved than a simple occurrence of a self-employed person depositing cash into a personal account.

If the amount of cash being deposited is not normal for the type of business which the customer operates or if you believe that the customer is structuring to avoid CTR reporting is one thing. The fact that the cash is deposited into a personal account is a moot point.
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#613573 - 09/19/06 01:03 AM Re: File a SAR ?
Dip Offline
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Dip
Joined: Mar 2005
Posts: 6,298
San Diego, CA
Randy--

Ok, I see your point. My specific situation was a personal customer who was the owner of a corporation. We had knowledge the corporation's account was at a different bank and the customer admitted he was depositing the cash from the business into his personal accoutn with us. We have tried to get him to open a business accoutn here but the customer refuses. Neither the customer nor his business are anywhere close to our bank. The cash coming in on this account is insane-- I think you would agree a SAR would be appropriate in thsi situation.

I must have skipped over the original poster's detail that the customer was self employed as I related it to my own customer. In the original poster's case, I would definitely look into the customer's business to see if the cash seemed logical to what he was doing as he woul dpossibly qualify as "cash intensive." From there I woul dmonitor for a SAR, but would not automatically file one.
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