The Cash-Paying Client: A Blessing or a Burden?
Every business has that one client who insists on paying for services with cash—maybe they had cash on hand, or maybe their accounting practices are a little less formal. Perhaps the client even thought they were helping you, since once deposited, that cash is immediately available in your account. Does it get any easier than that?
But then, you arrive at the bank to make the deposit—and if the amount is over $10,000, you’re asked for your identification, occupation, and other information, including the source of the funds. What happened to easy?
Why Banks Ask Questions Over $10,000
Under the Bank Secrecy Act (BSA), financial institutions are required to report single or aggregated cash deposits and/or withdrawals over $10,000 made by, or on behalf of, one person in a single day. When you make that deposit, your bank is obligated to request identifying information to complete a Currency Transaction Report (CTR), which is submitted to the Financial Crimes Enforcement Network (FinCEN).
The Purpose Behind Currency Transaction Reports
Sound scary? It shouldn’t. CTRs are used solely to help FinCEN and law enforcement monitor potential money laundering, tax evasion, and terrorist financing. Your willingness to provide the requested information actually helps law enforcement efforts and ensures your bank remains compliant with federal regulations.
What Happens If You Try to Avoid a CTR?
If you’re feeling reluctant to provide the information, you might think the best way around the hassle is to split your cash into smaller amounts or put some in savings and some in checking. That way the bank won’t ask those pesky questions and FinCEN will never know, right? Wrong.
Splitting cash deposits or withdrawals into smaller amounts or into different accounts to evade reporting requirements, also known as structuring, is illegal and may prompt the bank to file a Suspicious Activity Report (SAR) with FinCEN along with a CTR. Suddenly that CTR doesn’t seem so bad!
Be the Help, Not the Hindrance
Although CTRs might feel like a minor hindrance, they serve a vital purpose in helping law enforcement and financial institutions combat financial crimes. Make sure you’re doing your part and be the help, not the hindrance.
For more information on FinCEN’s reporting requirements, visit: FinCEN Educational Pamphlet – Currency Transaction Reporting Requirement. If you have additional questions or concerns around CTRs or best practices for cash deposits and withdrawals, contact our Risk Management practice – we’re here to help.
Article Contributed by Julie Mixtacki
