BANK’S REPORTING OF SUSPICIOUS OR LARGE TRANSACTIONS

How and when is a Bank required to “report” large cash transactions? 

Two Federal laws, the Bank Secrecy Act, and the USA Patriot Act (“Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2002”) and one Executive Order 13224, with similar provisions, give some guidance.

The Bank Secrecy Act  (The Currency and Foreign Transactions Reporting Act of 1970), is also known as the “Anti money laundering act.”

It requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities.

The USA Patriot Act imposes the requirement to report certain cash transactions to the Department of Treasury, identical to existing IRS cash reporting requirements.

Executive order 13224 blocks property and prohibits transactions with person or entities on the list of “Specially Designated Nationals and Blocked Persons” published by the US Treasury Department.   A searchable database can be found courtesy of First American Title Insurance, 1100 Walnut , Ste. 2980, Kansas City MO  64106, at: https://www.firstam.net, under “reference” – “Frozen Assets/Terrorist Search.”

In detail, Specifically the Bank Secrecy Act reads: 

“Sec. 103.21 Reports by banks of suspicious transactions. 

(a) General. 

(1) Every bank shall file with the Treasury Department, to the extent and in the manner required by this section, a report of any suspicious transaction relevant to a possible violation of law or regulation. A bank may also file with the Treasury Department by using the Suspicious Activity Report specified in paragraph (b)(1) of this section or otherwise, a report of any suspicious transaction that it believes is relevant to the possible violation of any law or regulation but whose reporting is not required by this section. 

(2) A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through the bank, it  involves or aggregates at least $5,000 in funds or other assets, and the bank knows, suspects, or has reason to suspect that: 

(i) The transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation; 

(ii) The transaction is designed to evade any requirements of this part or of any other regulations promulgated under the Bank Secrecy Act, Pub. L. 91-508, as amended, codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5330;

or 

(iii) The transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction. 

103.22     Reports of transactions in currency.

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(b) Filing obligations—(1) Financial institutions other than casinos. Each financial institution other than a casino shall file a report of each deposit, withdrawal, exchange of currency or other payment or transfer, by, through, or to such financial institution which involves a transaction in currency of more than $10,000, except as otherwise provided in this section..

(c) Aggregation—

(1) Multiple branches. A financial institution includes all of its domestic branch offices, and any record keeping facility, wherever located, that contains records relating to the transactions of the institution’s domestic offices, for purposes of this section’s reporting requirements. 

(2) Multiple transactions—general. In the case of financial institutions other than casinos, for purposes of this section, multiple currency transactions shall be treated as a single transaction if the financial institution has knowledge that they are by or on behalf of any person and result in either cash in or cash out totaling more than $10,000 during any one business day (or in the case of the Postal Service, any one day). Deposits made at night or over a weekend or holiday shall be treated as if received on the next business day following the deposit. 

(d) Transactions of exempt persons— 

(1) General. No bank is required to file a report otherwise required by paragraph (b) of this section with respect to any transaction in currency between an exempt person and such bank, or, to the extent provided in paragraph (d)(6)(vi) of this section, between such exempt person and other banks affiliated with such bank. In addition, a non-bank financial institution is not required to file a report otherwise required by paragraph (b) of this section with respect to a transaction in currency between the institution and a commercial bank. (A limitation on the exemption described in this paragraph (d)(1) is set forth in paragraph (d)(7) of this section.)

(2) Exempt person. For purposes of this section, an exempt person is: 

(i) A bank, to the extent of such bank’s domestic operations; 

(ii) A department or agency of the United States, of any State, or of any political subdivision of any State; 

(iii) Any entity established under the laws of the United States, of any State, or of any political subdivision of any State, or under an interstate compact between two or more States, that exercises governmental authority on behalf of the United States or any such State or political subdivision; 

(iv) Any entity, other than a bank, whose common stock or analogous equity interests are listed on the New York Stock Exchange or the American Stock Exchange or whose common stock or analogous equity interests have been designated as a Nasdaq National Market Security listed on the Nasdaq Stock Market (except stock or interests listed under the separate ‘‘Nasdaq Small-Cap Issues’’ heading), provided that, for purposes of this paragraph (d)(2)(iv), a person that is a financial institution, other than a bank, is an exempt person only to the extent of its domestic operations;

(v) Any subsidiary, other than a bank, of any entity described in paragraph (d)(2)(iv) of this section (a ‘‘listed entity’’) that is organized under the laws of the United States or of any State and at least 51 percent of whose common stock or analogous  equity interest is owned by the listed entity, provided that, for purposes of this paragraph (d)(2)(v), a person that is a financial institution, other than a bank, is an exempt person only to the extent of its domestic operations;

(vi) To the extent of its domestic operations, any other commercial enterprise (for purposes of this paragraph (d), a ‘‘non-listed business’’), other than an enterprise specified in paragraph (d)(6)(viii) of this section, that:

(A) Has maintained a transaction account at the bank for at least 12 months;

(B) Frequently engages in transactions in currency with the bank in excess of $10,000; and

(C) Is incorporated or organized under the laws of the United States or a State, or is registered as and eligible to do business within the United States or a State; or 

(vii) With respect solely to withdrawals for payroll purposes from existing transaction accounts, any other person (for purposes of this paragraph (d), a ‘‘payroll customer’’) that: 

(A) Has maintained a transaction account at the bank for at least 12 months;

(B) Operates a firm that regularly withdraws more than $10,000 in order to pay its United States employees in currency; and 

(C) Is incorporated or organized under the laws of the United States or a State, or is registered as and eligible to do business within the United States or a State.

(3) Initial designation of exempt persons—(i) General. A bank must designate each exempt person with which it engages in transactions in currency by the close of the 30-day period beginning after the day of the first reportable transaction in currency with that person sought to be exempted from reporting under the terms of this paragraph (d). Except where the person sought to be exempted is another bank as described in paragraph (d)(2)(i) of this section, designation by a bank of an exempt person shall be made by a single filing of Internal Revenue Service Form 4789, in which line 36 is marked ‘‘Designation of Exempt Person’’ and items 2–14 (Part I, Section A) and items 37–49 (Part III) are completed, or by filing any form specifically designated by FinCEN for this purpose. The designation must be made separately by each bank that treats the person in question as an exempt person, except as provided in paragraph (d)(6)(vi) of this section. The designation requirements of this paragraph (d)(3) apply whether or not the particular exempt person to be designated has previously been treated as exempt from the reporting requirements of prior § 103.22(a) under the rules contained in 31 CFR 103.22(a) through (g), as in effect on October 20, 1998 (see 31 CFR Parts 0 to 199 revised as of July 1, 1998). A special transitional rule, which extends the time for initial designation for customers that have been previously treated as exempt under such prior rules, is contained in paragraph (d)(11) of this section. (ii) Special rules for banks. When designating another bank as an exempt person, a bank must either make the filing required by paragraph (d)(3)(i) of this section or file, in such a format and manner as FinCEN may specify, a current list of its domestic bank customers. In the event that a bank files its current list of domestic bank customers, the bank must make the filing as described in paragraph (d)(3)(i) of this section for each bank that is a new customer and for which an exemption is sought under this paragraph (d).”

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