You know you're not a money launderer. The government, however, doesn't know that. That's why federal law requires banks to report certain transactions that might be evidence of a money laundering scheme. Depositing $10,000 or more might trigger just such a report if you bring the money in cash. It is also of not that $10,000 withdrawals trigger similar reporting.
Bank Secrecy Act
The Currency and Foreign Transaction Reporting Act of 1970 established rules for large bank and business transactions. Most people refer to this law by its more ominous name, the Bank Secrecy Act. The law requires that a bank report any cash transaction of $10,000 or more to the Internal Revenue Service. That includes deposits and withdrawals, as well as currency exchanges and using cash to buy such things as traveler's checks, cashier's checks or certified checks.
If you deposit $10,000 or more in cash at a bank, no one is going to swoop in and put you in handcuffs. Large transactions are perfectly legal. The bank just takes down your identification and uses it to file a form called a Currency Transaction Report, which it sends to the IRS. The bank goes ahead and puts the money in your account the same as it would do for any other deposit. When you'll have access to the money depends on your bank's policy about making deposited funds available. The bank doesn't have to wait for an OK from the IRS.
Not surprisingly, the IRS is a bit circumspect about what happens to filed Currency Transaction Reports -- or what it takes to trigger an investigation. All it says is that the reports go into a database, where law enforcement officials have access to them. These reports create a paper trail that helps the IRS make sure taxes are properly paid and cash isn't used to promote illegal activities.
The law also requires banks to report any cash transactions that seem intended to get around the $10,000 rule. All transactions that add up to at least $10,000 in one day will get reported as if they are a single transaction. The law also requires the bank to report multiple transactions that seem related. If you're consistently depositing, say $9,900, the bank may report that as a so-called "structured" transaction -- actions intended to avoid triggering a Currency Transaction Report. Really, a bank can report any transaction it thinks is fishy.
Plenty of people have legitimate reasons for depositing large sums of cash, and banks can get exemptions for their business customers who regularly do so. A big movie theater, for example, could easily pull in more than $10,000 in cash in a night. Rather than having to fill out a transaction report every day, the bank can obtain an exemption for the theater. The bank must file an exemption after the first large deposit. Some businesses can't get exemptions, though, including law firms, accountants, pawnbrokers, trade unions and others who, for whatever reason, the IRS wants to keep a close eye on.
- LendingTree: Why You Need to Be Careful With Large Cash Bank Deposits
- My Bank Tracker: IRS' Rules for Depositing More Than $10,000 Cash in a Bank Account
- The Washington Post: The Federal ‘Structuring’ Laws are Smurfin’ Ridiculous
- Federal Deposit Insurance Corporation: Bank Secrecy Act, Anti-Money Laundering, and Office of Foreign Assets Control
- Federal Financial Institutions Examination Council: Currency Transaction Reporting Exemptions—Overview
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