This article initially appeared here: https://fraudinsights.fnf.com/vol18iss05/article3.htm
The Bank Secrecy Act (BSA) was enacted to help combat money laundering through the requirement of reporting cash transactions exceeding $10,000. In order to avoid assisting in money laundering or other fraudulent activities, it is important to remember the motto: One disbursement per payee.
Below are some examples of evasion techniques:
In one example, a man who had completed several construction projects involving homes for sale convinced the settlement agent to reduce any payments due him to less than $10,000. He cashed more than 50 checks rather than deposit them into his bank account.
The man wanted to prevent the banks from filing a Currency Transaction Report reporting his suspicious activity. The checks were part of his scheme to defraud the IRS, since he did not declare the cash transactions as income on his federal tax returns.
In another example, a doctor had his patients pay him by check in increments of less than $10,000. If they owed more than $10,000, he instructed them to write multiple checks to ensure none of them were more than $10,000.
The doctor cashed more than $2 million at the counter of a bank to ensure he could evade the reporting requirements of the bank. The bank was inadvertently assisting him in hiding this income earned when he intentionally failed to report the payments on his tax returns.
Conversely, it is important to understand that not everyone who makes cash deposits or cashes checks for less than $10,000 is attempting to evade paying taxes. It is not illegal to deposit cash into a person’s bank account.
A bartender, for example, can earn thousands in cash each week. During any given month the bartender could easily make multiple cash deposits. If the intent is to report the earnings on their tax returns and not to “structure” these cash deposits, there is nothing illegal about this.
Sometimes settlement agents receive itemized invoices or demands for payment. The itemization may describe the charge for different products or services payable to the same person or entity.
Settlement agents may itemize the charges and descriptions on their closing statement, but should simply combine the charges and make just one disbursement per payee when disbursing their file. They should never make multiple disbursements to the same payee.
Rather than accuse or imply whether someone’s actions are illegal or not, it is best to live by the hard and fast rule – never waiver.
The information provided herein does not, and is not intended to, constitute legal advice; instead, all information, and content, in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
Article provided by contributing author:
Diana Hoffman, Corporate Escrow Administrator
Fidelity National Title Group
National Escrow Administration