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I saw an article recently where a man withdrew $600,000 USD in cash from his bank. I'm sure many folks here would advise against this move for obvious (and perhaps not-so-obvious) reasons.

My question: suppose you did this and then, some months later, changed your mind and wanted to re-deposit with a bank. I assume the gent cannot simply walk into a bank with $600,000 USD and deposit it, right? Wouldn't money-laundering alarms be raised? Wouldn't the IRS like to know where the money came from?

littleadv
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Fixee
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3 Answers3

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Money laundering alarms would definitely be raised, way before you walking in with the cash to deposit. Every cash transaction over $10K will be reported by the bank (and not only banks have to report), so the report will be sent when you withdraw the money, as well.

But if the money is legitimately yours and you can show the sources, then you shouldn't be worried. There's no law against having cash. Its just very hard to track down the cash money sources, and if someone asks you and you cannot show the proofs - the problem would definitely be yours.

Dilip Sarwate
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littleadv
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    They will also submit the reports if you make a series of transactions that seem designed to avoid the 10K limit. Non-banks are also required to make these reports including auto dealers. Pay 50K in cash for a new car, and they will report it. – mhoran_psprep May 05 '12 at 11:23
  • Pay $50K by personal check and the auto dealer will report it too, as will the bank on which the check is drawn. – Dilip Sarwate May 05 '12 at 12:39
  • @DilipSarwate I'm not sure you're right about this. This is required for cashier's check, but IMHO not for personal/business check. They may report it at their discretion, but I'm not sure if they have to. – littleadv May 05 '12 at 19:21
  • You're right, its any transaction, not just cash transactions. – littleadv May 06 '12 at 04:09
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    @littleadv The title of that page is "FAQs Regarding Reporting Cash Payments of Over $10,000". Cash is defined in point 6, and point 11 specifically states that personnal checks are not considered cash. It also says that written notice must be provided to the customer when form 8300 has been filed. I paid for a car by personal check, and never received this notice. Also see this answer: http://money.stackexchange.com/a/9271/1119 – KeithB May 06 '12 at 15:45
  • @KeithB so I did remember correctly:) – littleadv May 06 '12 at 18:27
  • @KeithB I guess I was wrong about the auto dealer having to report payments of $10,000 or more by personal check. But I do seem to remember from a long time ago that banks (as opposed to businesses and self-employed people who are addressed in the IRS's FAQ) were supposed to report checks (cashed or deposited) of $10,000 or more, even though I suspect that the IRS did little with the reports as long as they reconciled. Maybe now that everything goes through the ACH and is reconciled electronically, banks are no longer required to report large checks either. – Dilip Sarwate May 06 '12 at 20:45
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    As mhoran_prprep says, breaking up a large deposit into a bunch of smaller deposits not only does NOT avoid scrutiny, but is an illegal action in an of itself called structuring. That's true even if the original source of the funds was perfectly legal. – stannius Mar 25 '16 at 20:57
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In addition to the money-laundering, lifestyle, income tax, etc issues discussed already in other answers, one other matter that might concern the bank is whether that cash you are bringing in to deposit is genuine currency or (some or all of) the bills are counterfeit and you are using this mechanism to get them into circulation. Even if you withdraw a very large amount in cash from your bank, step out the door and come back just a few minutes later saying that you have changed your mind and want to put that money back into your account, there is still the question as to whether the cash you have brought back is exactly the same as you took out or a substitution was made in the interim.

I once needed a bank draft for $1000 and went to my bank to get it, taking with me a check made out to Cash for $1003 (the bank's fee was $3). The bank would not give me a bank draft in exchange for the check, or if I cashed the check right then and there and paid for the bank draft using the cash that the teller had just handed me. I had to tear up the check, write another one payable to the bank, and then I got my bank draft. As JoeTaxpayer says, it is a matter of paper trail.

Additional matter added in edit: According to Wikipedia, because of the Bank Secrecy Act of 1970,

Many banks will no longer sell negotiable instruments when they are purchased with cash, requiring the purchase to be withdrawn from an account at that institution.

which was exactly my experience. Furthermore, even the banks that will still sell you a cashier's check or money order for cash must keep a Monetary Instrument Log (MIL) that records all such cash transactions for amounts between $3000 and $10,000, keep the records for at least five years, and produce it upon request of a bank examiner or auditor (and presumably upon subpoena by a district attorney or divorce lawyer). Cash transactions of $10,000 or over are, of course, reported to the IRS on Currency Transaction Reports. In short, a paper trail exists for some time even for cash transactions quite a bit smaller than $10,000.

Dilip Sarwate
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Yes, but it's a matter of paper trail and lifestyle. Your $600K guy may get questioned when he makes the deposit, but would show the record of having that money elsewhere. People buy cars with cash (a check) all the time. The guy filing a tax return claiming little to no income or no return at all, is more likely to get flagged than the $100K+ earning couple who happened to be able to save to buy their $25K car every 10 years with cash.

On reading the article, the bank had its own concerns. The guy who was trying to withdraw the money was elderly, and the bank seemed pretty concerned to make sure he wasn't about to be scammed. It may not be spelled out as such, but a custodian of one's money does have an obligation to not be party to a potential scam, and the very request for such a huge sum of money in cash is a red flag.

JTP - Apologise to Monica
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