Image source: Getty Images
It’s your money, and generally, you have the right to withdraw as much — or as little — as you desire from your bank account. However, under a law called the Bank Secrecy Act (BSA), banks must report any deposits or withdrawals of $10,000 or more. Here, we’ll cover why the BSA exists and if it’s anything you need to be concerned about.
Imagine that you’ve been saving up to buy an old classic car. You find one that needs tons of work to become roadworthy, but you’re smitten and willing to pull $12,000 from your savings account to make it yours.
You stand in line, waiting for a bank teller to become available, anxious to get your money and be on your way. Withdrawing the funds takes mere minutes, and you leave the bank, not giving the bank transaction a second thought.
However, the simple withdrawal of more than $10,000 raised a red flag within the bank, thanks to the BSA.
During the Nixon administration, the government decided to pursue financial fraud at the banking level. To catch money launderers, drug dealers, and other bad players, they needed the help of financial institutions. And so the Bank Secrecy Act was born.
Under BSA, banks became legally obligated to report any deposits or withdrawals over $10,000.
In all fairness to the government, $10,000 was worth a heck of a lot more in 1970 than it is today. In fact, a deposit or withdrawal of $10,000 in May 1970 was worth $81,365 in today’s money, according to the Bureau of Labor Statistics’ CPI Inflation Calculator. If someone made a deposit or withdrawal that large back then, it was worth noticing.
What’s interesting is that the $10,000 threshold hasn’t changed. Because $10,000 doesn’t have the buying power it once did, there are more Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs) being sent to the IRS than ever before.
CTRs and SARs are two of the reports triggered in the banking compliance process when customers make a deposit or withdrawal of over $10,000.
Banks have no leeway. By law, they must comply with the BSA or risk fines or worse. They can’t close their eyes to one person’s bank activity while focusing on someone else’s. We’re all treated the same.
Banks have been dealing with BSA regulations for 54 years now and in that time, they’ve become experts at spotting patterns. For example, when someone makes a deposit of $2,000 one day, $5,000 the next, and $3,500 a few days later, the bank realizes that they could be “structuring.” Structuring is the act of making multiple smaller deposits in hopes of getting around the $10,000 limit that will be reported to the federal government.
Of course, the same person may be totally innocent. However, a report is generated just the same.
If you’ve ever deposited or withdrawn $10,000 from your bank account, you may wonder why your bank transaction didn’t trigger a report. It did. However, everyone — from banks to the government — realizes that most transactions are completely innocent, and those reports are quickly cleared up without you ever even knowing it happened.
The only people who have cause to worry are those involved in illegal activity. If that’s not you, you’re in the clear.
Chances are, you’ll never be questioned about your banking activity. However, if you really want to cover yourself, document how the money is spent or where it came from.
For example, if you sell a boat or earn a fat commission check, keep a record of the transaction as well as depositing it into your savings account. The odds that you’ll ever hear from a federal investigator are negligible. Still, being prepared means you have nothing to worry about in the off (off) chance that someone questions you.
While the BSA may feel intrusive to some, the law is in place to protect us from those who help fund terrorists by laundering their money and others who cheat the system, ultimately costing us all more.
Like removing our shoes at the airport or waiting in line at a border crossing, the BSA is one more way the government hopes to make us safer.
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
