Suspicious or Just Stupid?

Posted By: Matt_B

Suspicious or Just Stupid? - 11/03/15 09:44 PM

I'm struggling on one. I'll try to keep it simple.

Jane and Joe own/run a construction business, daughter Sally works for them, son Sam doesn't. All have accounts, including the business, Jane is signed on or jointly owns all of them.

Jane handles the business end, Joe does the manual labor. Jane moves money in and out of the business account like it's her full time job. Money goes in, money gets transferred to Sally or Sam's account one day, comes back to the business a day or two later. Jane doesn't move money in/out of her and Joe's personal account much though. Jane does weird transactions out of the kids's (18 and 20, so not really kids) accounts. (e.g. moves $15k into kid's account, then comes in and requests a cashier's check out of his account, payable to the IRS, referencing the business name, or comes in with cash to buy money orders via one of the kid's accounts, but it clears payable to a vendor, referencing the business)

It makes no sense, then throw in that she's so bad at juggling the finances that between all the accounts, they've generated $9,000 or so in fee income YTD from all their overdrafts! Why in the world, aside from stupidity would you run a business like that? If you're dodging debt (nothing concerning has popped up from the court site, nor have we gotten levies or anything on them), it seems like it'd be cheaper to pay it than pay all the fees...and I can see them paying quarterly taxes.

About all I have is suspicious use of multiple accounts, 35h "Little or no concern for product performance penalties, fees,
or tax consequences", and 35o noo apparent lawful purpose.

Can't even guess at what they think they're doing, or what they're trying to accomplish.
Posted By: kw004h

Re: Suspicious or Just Stupid? - 11/03/15 09:54 PM

Is it safe to assume that no insight is able to be gleaned from the customer-facing employees?

You never know what tidbit of information an individual might "learn" from his/her peers which might be guiding this strange activity. For example, perhaps she (mistakenly) believes that by stashing funds in accounts with her child's name, she is shielding the funds from seizure in case of a lawsuit against the business?

That being said, I'd have someone sit down with the customer to discuss the frequent transfers or opening of additional business accounts (perhaps under the guise of offering a product that would allow better oversight?) and see what you could find out.
Posted By: Matt_B

Re: Suspicious or Just Stupid? - 11/03/15 10:07 PM

Safe to assume, yes. Trying to pull more information out of people, but aside from recognizing the names, not much so far.

I'd love to do some interrogation, that's beyond my authority though, so I pretty much have to hope someone will ask for me. We'll see, I've gotten seemingly meaningless bits of info before that became much bigger when put with the rest of the puzzle, so I never discount anything that anyone might know.
Posted By: edAudit

Re: Suspicious or Just Stupid? - 11/03/15 10:08 PM

possibly a lawsuit or bankruptcy on the horizon or just plan stupidity.

by making the checks out of the kids name it is jeopardizing any benefit of having a corporation (Just do not tell them it)
Posted By: Matt_B

Re: Suspicious or Just Stupid? - 11/03/15 10:18 PM

And they're not sitting on any large sums of money on a regular basis, probably not even above $5,000 in all accounts on an average daily balance.

They're not kiting, she watches her account and moves in enough money to cover the checks, once they've been presented a first time and bounced anyway. It's a very expensive way of delaying payment if that's what she's after, but that doesn't make sense.

There should just be a box that's titled "Too stupid to have an account".
Posted By: edAudit

Re: Suspicious or Just Stupid? - 11/03/15 10:21 PM

You can always send them away (of course Mgmt will not allow that due to the fees or you are a credit union in which case it is easier to get them locked up than to close the account)
Posted By: Matt_B

Re: Suspicious or Just Stupid? - 11/04/15 02:54 PM

No kidding. I struggle to get people to remember that all we have to allow them is their share amount in a savings account, and a vote at the meeting. We can and should take away anything/everything else and make things so inconvenient that they choose to leave us and solve the problem. But...that's just not nice and we couldn't do that, no matter how bad the people are! smirk
Posted By: Naise

Re: Suspicious or Just Stupid? - 11/05/15 03:48 PM

That sounds similar to the very first SAR I filed. This couple had a joint account and the wife had a single account. They were both on one business account and he was the sole signer on the other. They'd do bizarre transfers, like $2k then $5k ten minutes later from one business account to a personal account. Then three days later $7k would be transferred from that personal account to a different business account. They also had a few personal accounts at different institutions, and they would transfer funds in the same fashion using checks (e.g. writing a $5k check from one of our accounts to a different FI, two days later deposit $4.5k from another FI to one of their accounts here). They did the same thing Matt described with cashier's checks (transfer $8k then come in and get a cashier's check issued to one of them for the same amount). They also did in-person, online and telephone transfers, in addition to checks to and from different FIs. I never wanted to see an excel spreadsheet again after I mapped everything.

Anyway, they were doing something bad because we got a supporting docs request from the Secret Service several months and several SARs later.
Posted By: thomasj

Re: Suspicious or Just Stupid? - 11/06/15 03:49 PM

Sounds like they are playing a shell game with corporate assets. I would not be surprised if an IRS summons will be coming in the next year or so. That could be quicker if you file a SAR. Don't get too hung up on discovering exactly what they are doing, that's not really our job. Our job is to detect suspicious activity and report what we know so that the people who do have the authority to investigate can dig deeper. If you have dug as deep as you can and still don't have a legitimate explanation, fill out your SAR and be as detailed as you possibly can in the narrative. Just remember that once you file you will likely be making multiple filings until the activity comes to an end. In a credit union that could be a long time since (I assume) you are limited in your ability to boot the customer member out the door.
Posted By: Elwood P. Dowd

Re: Suspicious or Just Stupid? - 11/06/15 05:14 PM

The decision to file the first SAR is the decision to file a series of SARs...

While I don't know what they are doing, I see nothing that suggests they know what they are doing either. I've seen a lot of aberrant behavior in customers from different ethnic backgrounds; i.e. some of it is about customs, psychology and attitudes toward banks and the government. However, occasionally, I've seen bizarre financial behavior from people who looked a lot like me! wink

Choosing from the options offered, I just think they are stupid.
Posted By: Matt_B

Re: Suspicious or Just Stupid? - 11/06/15 06:07 PM

You're right TJ, suspicion of using your account in an illegal way isn't cause to terminate membership. If we know, that's another story. We can certainly be a pain and let them make the decision to leave...but we wouldn't do that because we're so nice, and we make great money off this relationship, plus they've been with us forever, blah blah blah.

I'm really leaning towards stupid, after talking to a half dozen staff that interact with these folks on a weekly or more frequent basis. I just have a hard time understanding someone being that stupid. This is why the CFPB thinks they need to regulate OD fees more I guess, because of people just like these.

Continued monitoring will happen either way, with all the checks they take out as cash, they're on reports a couple times a week whether I like it or not.
Posted By: John Burnett

Re: Suspicious or Just Stupid? - 11/06/15 07:54 PM

Matt_B_1570 -- What legal form does the construction business take? Is it a partnership, LLC, corporation? Or is it a sole prop?
Posted By: Matt_B

Re: Suspicious or Just Stupid? - 11/09/15 03:00 PM

It's an S-Corp, so I think that makes it a little less concerning having the commingling of funds, since everything would (in theory) be reporting on their personal tax returns. I have very little faith they could possibly be filing accurate returns based on her total inability to manage a simple checking account...but that's purely supposition.
Posted By: John Burnett

Re: Suspicious or Just Stupid? - 11/09/15 03:38 PM

No, an S-Corp doesn't get dispensation for commingling funds. A corporation is a corporation regardless of how it's treated for tax purposes. When a corporation moves money for other than payroll, expense reimbursement or dividend/return of capital purposes to accounts of individuals, it removes those funds from the direct legal reach of creditors, including tax agencies and others. If those creditors have to sue the corporation to get paid, and find out that the bank has allowed sloppy (or deliberate) funds transfer management by the corporation, the bank becomes a target for facilitating conversion of corporate assets or breach of fiduciary responsibility.

I'd be looking for a way to extricate the bank from this relationship, and file a SAR as the door is being closed behind this family.