Banks Are Reporting To IRS Multiple Cash Deposits Of Under $10,000
By Diane Piret – ICTA Industry Affairs Director ………
Structuring your cash bank deposits with the specific intent to avoid having those transactions reported is not only illegal, but you may find that the IRS has seized most of the money in your bank account. Illegal structuring of cash deposits makes those funds vulnerable to seizure, and potentially forfeiture, under federal laws. Yes, they can do that, and they recently have done so. There is an IRS Task Force working right now investigating cash businesses, including coin dealers. Some significant seizures have already happened very recently to several coin dealers.
To the best of our knowledge, none has yet been charged and prosecuted criminally for such structuring, but that may be only because the source of the funds was determined to be legal money. It does not mean that the dealers could not be prosecuted. And they are still out a lot of money. A lot – some well into six figures. On top of that, they’ve had to hire expensive attorneys to help them navigate through the situation and to determine whether they could get any of their money back.
In a couple of the instances we know of, the dealers took the “advice” of the bank teller when she said that if they keep their cash deposits under $10,000 then she wouldn’t have to file a report. DON’T EVER LET A BANK TELLER INSTRUCT YOU ON HOW TO CONDUCT YOUR CASH BUSINESS. If you’re not sure what is appropriate and legal, you must find your answer from an authoritative source.
If you have over $10,000 in cash to deposit, just do it.
As you know, it’s not uncommon for coin dealers to make cash bank deposits more than once a week, whether in green cash or cashier’s checks and money orders. If the bank sees a pattern of what might be illegal behavior – such as when a coin dealer’s cash Vol. XXXVII No. 9 September 14, 2012 Single copy price: $6.50 deposits are relatively frequent and always less than $10,000 – the bank is required to file a Suspicious Activity Report (SAR). In all of the coin dealer cases when the IRS came to the dealers’ places of business, it was in response to a report by the banks. If you had, such as one dealer did, six IRS agents walk into your store wanting to talk to you about your cash deposits, you just know this is not going to be a good day.
How do you protect yourself from these IRS seizures? Just make your deposit. Do not deliberately keep the deposit under $10,000 – that’s what will get you into trouble. This doesn’t mean that you can never deposit less than $10,000. You are not required by any law to deposit all the cash that came in. It’s perfectly legal to retain some of the cash in your shop for legitimate business purposes. It’s also quite common that over the course of a three or four day coin convention for dealers to take in well over $10,000 in cash. While they may not have taken in over $10,000 in any one day, by the time they get home they have this large amount of cash that they need to deposit into their bank account.
Banks may file a CTR (Currency Transaction Report) on your cash deposits, which is no big deal. When you think you’re being clever by keeping the transactions under $10,000 (structuring your transactions) that’s when you look suspicious, and the bank will report you. Once again, structuring your deposits or any transactions to make them appear as though reporting is not required is illegal, and you can be charged criminally.
There’s no point in getting yourself worked into a frenzy about how this is wrong and it shouldn’t be. This has been the law since 1986, and quite literally, it would take an act of Congress to change it.
What should I do – or not do – if IRS agents “visit” me?
The one element that is consistent in each of these horror stories of IRS seizures is that when the IRS agents came to each dealer’s place of business and the agents wanted to talk with him, the dealer did so without benefit of professional counsel. In each instance, the dealers were unaware that they might have done anything wrong. But in the course of conversation with the IRS agents, the dealers revealed information that they should not have. The IRS had already taken the money from their accounts, but admitting that they deliberately kept cash deposits under $10,000 doesn’t help their cases when they try to get the money back. Sometimes the IRS agents first say they’re investigating somebody else, perhaps one of your clients. If that is true, and they want records on one of your clients, tell them you would be more than happy to comply with their request, but will need a subpoena or summons for the information so that you will be legally protected when giving out client information. If the agents want to speak to you about something you did, do not answer any questions without counsel present. That is your legal right. You should always act professionally, and definitely not be argumentative. Just ask them for a business card, and tell them that you would be happy to answer any of their questions, but that your attorney will be in contact with them to set up a meeting. That they’re coming to you, however, means they already believe you have some involvement, either as a witness or target. This is definitely not a good time to be chatty. Other than exchanging contact information, you should not say anything more.
IMPORTANT NOTE – Revenue agents – the ones who conduct compliance exams – will either call or send you a letter to set up an appointment. If agents come to you without notice, it will usually be a Special Agent with the IRS – Criminal Investigation Division or another federal agency.
While ICTA can’t formally advise you on these matters, we do have some suggestions.
- Speak with your legal counsel – today if possible – on how you should handle a situation if the IRS comes to talk with you. It’s also a good time to find out how much your professionals know about the seizure/forfeiture and structuring laws. It’s been our experience that most accountants and attorneys are severely lacking in knowledge of the cash reporting and anti-money laundering laws.
- If you don’t have an accountant and/or attorney, get one. Get a good one. It doesn’t have to be an expensive law firm – in fact there are a lot of former Assistant US Attorneys who are now in private practice. If you locate one, be sure to ask what types of cases they worked while with the government. Your bookkeeper is no substitute for a professional CPA, just as Uncle Charlie’s nephew who is in law school is no substitute for an attorney. Make sure your professionals are well-versed in cash reporting and anti-money-laundering laws, including Section 352 of the USA Patriot Act.
- If IRS agents “visit” you, you are not obligated or required to speak with them. We suggest you ask them what they want to talk about. Even if the subject seems benign, you still want to refer them to your professional counsel. You should ask to see their credentials. If you see a gold badge, you want to be extremely careful because they represent the IRS-Criminal Investigation Division. You may want to ask them for their business cards and tell them that you will forward the information to your attorney and he or she will contact them to set up a meeting. Or you can tell the IRS agents that they may contact your attorney and then give them that contact information. In this case, we suggest you give your attorney a heads up that he or she may be contacted by the IRS. Your attorney will likely want to talk with you before hearing from the agents. It doesn’t make any difference if they are there to get information on a client or you, you do not want to answer any questions until speaking with counsel. If they already have a search or seizure warrant in hand, then there is nothing you can do except get a copy of it and let them do their job. They are in control of your business or house at that point. But you are in control of your mouth – keep it shut.
To recap, you should never, ever deliberately keep your cash bank deposits less than $10,000 specifically to avoid any reporting.
Even if the money is totally legal, “structuring” any cash transaction – including bank deposits – specifically to avoid reporting those cash transactions is against the law. It is a violation of federal law, and you could be prosecuted for it.
For more information on this subject, ICTA has a Cash Reporting Kit that you may find helpful. It is only $100 to ICTA members, and $500 to non-ICTA members. It includes sample IRS/ FinCEN 8300 forms and instructions as well as a Q & A that “translates” much of the cash reporting requirements for you as pertains to the coin business. There are also some documents contained in the kit that you cannot get anywhere else – certain letters from the IRS to ICTA that even an IRS agent would not have.
Contact ICTA to order the kit.
USA Patriot Act, Section 352
If you’re not familiar with this section of the USA Patriot Act that applies specifically to coin dealers, we strongly suggest you consult with your accountant or attorney immediately. Virtually all coin dealers are required to be in compliance with this federal law that has been in effect since January of 2006. Section 352 requirements include having a written and implemented AML (antimoney laundering) policies and procedures manual (AML Plan), a designated compliance officer, ongoing training, and an annual independent review of your plan/program. You may wish to consult the ICTA website (www.ICTAonline.org) and click on the What’s New tab for more information. Many ICTA members have worked with Mr. Ray Gregson, a retired IRS Special Agent, who has written many of these AML plans for coin dealers. It is becoming increasingly common for banks to demand a copy of the coin dealers AML Plan and a written independent review report. Failure to produce the plan and report within a short period of time – usually 10 days to two weeks – has resulted in some coin dealers’ accounts being closed by the bank. If you get such notification from your bank, it will likely be too late to start to scramble to have both a plan and the independent review report done. If you don’t already have the plan and report, we very strongly suggest you remedy that deficiency immediately.
ICTA Industry Affairs Director
ICTA is the national trade association for the rare coin and precious metals industry. For more information on ICTA, you can visit the website at www.ictaonline.org. For membership information call 410-626-7005 (Executive Office) or 504-392-0023 (Industry Affairs Office). ICTA is a non-profit national association representing the rare coin, currency and precious metals industry. ICTA is supported solely by membership dues and donations. While we believe the information provided to be correct, ICTA cannot be held responsible for any errors, whether typographical or in fact. This information is provided to assist you, but should not be the sole source for determining your business practices.
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