Once again our Legal Counsel has weighed in on a BSA matter when they didn't like the BSA answer and I'm left to prove my point. We have a customer who operates a business selling cosmetic supplies who is a sole proprietor. She does NOT want a business account and since the Sales Officer is her neighbor, convinced him to let her run everything through a personal account. I think this is wrong on many levels and have verbal agreement from some law enforcement agencies such as the IRS and USAGO. However, I am being asked to provide "documentation" that this is not a "best practice" and to prove why this customer should open a business account. The mere fact that she's so resistant is not enough. Anybody have documentation or a case that would make this point? Thanks!

The guidance you are looking for does not exist. For a SP, the individual is the business. If the bank wants them to force them to open a business account for service charge purposes, that is up to the bank.

Agreed. Not a legal or tax issue at all; up to bank if they want to make sure they are paid business account fees.

FWIW, because the client is comingling funds for other than personal, family or household purposes, the account could be excluded from certain consumer protections (e.g. Reg E, Reg P, etc.).

In Appendix F of the BSA Exam Manual, one of the Red Flags for Money Laundering under Other Unusual or Suspicious Customer Activity is "Customer uses a personal account for business purposes." BSA Exam Manual Red Flags

Personally, I always made them open a business account. We made it bank policy so that it was clear what was personal and what was business, and so that the bank was compensated for higher #s of deposits and checks.

Obviously, if the customer is not a sole proprietor this should not be allowed at all. For a sole proprietor, it is one pocket.

As others have commented on already, if this account is for a SP, this isn't an issue. However, if this is not the case, I would definitely file a SAR. You can use the link Ted provided as guidance on the subject matter.

On a side note, I have worked at both FDIC and OCC regulated banks. From my experience, both regulators expect SARs to be filed in this case.