Before you stash that huge sum of money in a bank, ask this question; how much cash can I deposit without red flag? Money laundering and tax evasion are becoming rampant. That is why there’s a limit set by the financial regulatory agency to report bank deposits.
So, how much cash can I deposit without red flag is the question!
When you make deposits lower than $10,000 (cumulatively) for a while, it will not be red-flagged. But when you make several smaller payments within 12 months, then the 15 days for reporting such transactions to the Internal Revenue Service (IRS) starts counting once the total amount exceeds $10,000. Structured deposits may also attract a red flag; that is when you consistently make deposits of $9800 within 14 days, to evade IRS. In such cases, the financial institution needs to file the Suspicious Activity Report and send to the FinCEN.
So, that is it about bank deposits that trigger the red flag. Continue reading for more information.
Why Do Banks Red Flag Deposits?
It hurts to find that the money you legally deposited in a bank was red-flagged and attracted a series of questions from the authorities. But the reasons banks red flag deposits are convincing, though. They are also obliged by the law to do so.
Now, one of the reasons that banks usually red flag deposits higher than a certain amount is because of the BAS (Bank Secrecy Act), which is also regarded as “Currency and Foreign Transaction Reporting Act.”
The main goal of this law guiding banks and other financial institution is to prevent tax evasion and money laundering. Money laundering is a serious criminal offence responsible for many country’s backwardnesses in terms of economic growth. Cash meant for infrastructural development and to better the lives of the people, will be stolen and stashed somewhere one person or a group of people who call themselves called politicians.
There are many cases of money laundering across the globe. It frequently happens in countries lacking severe punishment for corrupt political officeholders. Most of the corrupt officers even got scot-free when tried in a law court in their home country. That is how ugly the situation is.
When we say money laundering is a serious problem across the continent, it sure is. A report by the International Monetary Fund shows why. The body claims in its report that the whopping sum of $600 billion to $1.5 trillion is being laundered every single year.
Now that figure represents funds that could positively affect the lives of many. But some political officer holders don’t care about the people they are governing. Like it or not, money laundering is a severe case around the world today. Once these criminals steal and launder money, they immediately consider depositing the money to make it look like they worked and earn such cash via honest means.
So banks and other financial institutions have a reputation to protect and a duty to perform. For transactions above $10,000, which is the limit set by the BSA, they have to report to the IRS (Internal Revenue Service).
How Do Banks Red Flag Deposits?
When a client attempting to pay up a private business, walks into a bank and deposits $10,000 in cash or more, the bank has to report such transactions to the relevant body, IRS.
Most customers know this. But for those ignorant of such reports, the bank has to notify them beforehand.
How is the report processed or sent by the bank to the IRS? It is by filling Form 8300. This form is there to help provide reports regarding transactions whereby the total cumulative sum is $10,000 or over.
What this means is that even if you make a cash deposit of $5000 and initiate another $5000 deposit at different times, the Form 8300 still has to be filled and the transaction red-flagged. Note that this sort of related transaction is one that took place at a space of 24 hours.
The bottom line is when there is a connection between both transactions; banks usually do not waste time when it comes to completing the Form 8300 and red-flagging the deposit.
What The Form 8300 Provides IRS And Fincen
First off, the IRS and FinCEN are two relevant agencies belonging to the U.S government. The IRS (Internal Revenue Service) is saddled with the responsibility of tax collection and enforcement of laws relating to taxes.
The FinCEN and IRS are both under the department of the treasure. The FinCEN (Financial Crimes Enforcement Network) was created to provide support to the federal, state, and international law enforcement. The agency’s responsibility is to analyze the information provided via the BSA (Bank Secrecy Act).
The BSA ranks as one of the top tools deployed by the U.S to fight against tax evasion and money laundering. However, for both agencies (IRS and FinCEN) to carry out their duties, the Form 8300 must have been filled, thus triggering a red flag.
This Form 8300 is a weapon in the hands of both agencies. It provides valuable information, which invariably helps the agencies to clampdown drug dealers and money launders. Money laundering fuels corruption and illegal deals. It also facilitates criminal activities like terrorist financing, including drug-related transactions, which requires enormous sum.
Another critical question is who fills the Form 8300? Well, the U.S law demands that businesses and trades report transactions involving cash payments that are $10,000 or over, to the government. The simple way is by filing Form 8300. Failure to do so attracts a fine, mainly when the form isn’t filled within 15 days of the said transaction.
Here is a clear example of a case where a business needs to file Form 8300 to protect their client.
Michael Peters (client) approached a travel agency to help charter a private jet to transport a group of athletes to another city. He then made another request for the agent to assist in booking hotel rooms for the players, including securing admission tickets. Michael also proceeded to pay the agency with a transaction involving two money orders, with each of them totalling $6,000 ($12,000 in total).
In the above scenario, you can see that the agency got over $10,000 from the client, Michael Peters, in the same transaction. In this case, the agency must file the Form 8300, and a copy of the form sent to FinCEN.
Credit unions and banks are required to send a report of such transactions to the agencies mentioned above, as failure to do so attracts severe penalties.
The Form, upon completion, can either be mailed to the IRS or filed electronically.
Filing The Form 8300: What Transaction Would Warrant This?
Not all transactions require businesses to file the Form 8300 on behave of their client to avoid being penalized by the IRS. Check the list below to see some of the transactions considered necessary.
- Payments for pre-existing debt
- Contributions involving escrow arrangements
- Purchases involving negotiable instrument
- Reimbursement of one’s expenses
- Selling of goods and services
- Sale of an intangible property
- Sale of real a property
How Depositing Over $10,000 Can Become A Problem
It’s your hard-earned money you are depositing, so you should have no reason to worry. But do you know that how you make your deposits can spell trouble with the authorities? Keep in mind that depositing over $10,000 isn’t the problem. You can even deposit up to $100,000 and more, and still not have any issue with the authorities.
So what can create a problem? It is how you deposit the money. There will be a red flag when you split your money into smaller deposits, but the aim is to deposit $10,000. In this case, it could be something like; $3,000, $2,000 and $5,000, later on, to make up $10,000. You might not have a bad intention for depositing that way. But the bank or IRS might not share the same view.
They may conclude that you are only structuring those deposits to circumvent the BSA (Bank Secrecy Act), including the CTR process of the bank. Structuring, which implies splitting deposits into smaller units that amount to $10,000 or more, is an illegal and punishable offence. It makes the government and banks feel that you are trying to play a fast one on them.
You may not have heard, but such crimes have caused hundreds of people millions of their hard-earned money. For example, in 2016, the IRS reported that it seized $46 million from 600 individuals who deposited money.
The individuals whose monies were seized may not have gotten involved in illegal business. Majority of them may not be into unlawful activity. It’s just that the method by which they deposited the money gave them away.
Your large deposit of $10,000+ split into smaller amount is not the only factors that count. What counts is the frequency at which you deposited the money, too.
A single deposit of say $9,999 does not fall into the criteria for reporting. But when you deposit $9,999 every single day, for at least two weeks, then there’s going to be a red flag.
The Bank Secrecy Act is a stricter law than one can imagine. It was enacted to help combat money laundering, including tax invasion. So before you start asking how much cash can I deposit without red flag, know that trying to circumvent the system is a punishable offence. You could lose your hard-earned money to the authorities if your transactions are suspicious. So, avoid structuring your payments or anything that could get you into trouble, even when a red flag is raised.
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