- Creative Accountant has cheated his clients out of $200,000 last month. Obviously, he cannot just go ahead and deposit his ill gotten gains into the business operating account. Thus, Creative Accountant purchases a couple of CDs, funds a dummy corporation – Creative Plumber – and also gives cash to an intermediary – Creative Subterfuge – who will write a check from a legitimate business account to Creative Accountant, which the latter can now deposit.
- With the ill gotten cash properly hidden, Creative Accountant will now work to move everything into his account. He may cash out the CDs, have Creative Plumber write him a check for services rendered, and deposit Creative Subterfuge’s check as well. Suddenly the $200,000 he stole no longer look like a big amount of money, but instead represent a compilation of different amounts of money.
- Last but not least, Creative Accountant is now free to purchase a new car, fund his IRA and make his mortgage payment.
The Bank Secrecy Act is designed to foil the attempts of people such as our imaginary villain simply by requiring banks to track customers’ transactions, flag those that involve any movement of money in excess of $10,000, and then act as a policing agency by alerting Federal Government officials in cases where any kind of criminal activity may be suspected.
For those who suspect that there may be some civil rights problem with the practice, you may be right. After all, consider the implications of this decades old practice:
- Your social security number, date of birth, account number, date and amount of financial transaction is reported on a currency transaction report – which incidentally is forwarded to the IRS – when you close on your house and deposit the money into your account. Your mom who gives you $10,000 in cash for finally graduating from college will be reported (as will you); and of course you will want to remember that the withdrawal of $10,000 to use in whatever way you chose is also being traced.
- If you feel that your rights of protection against unreasonable search and seizure are being violated and you decide to forego the flagging process by withdrawing only $9,999 or some such sum from your account – be careful! You probably just bought yourself a suspicious activity report which not only includes all of your personal information, but also will lead the bank to investigate your financial dealings. Their findings along with all supporting information are sent to the Financial Crimes Enforcement Network. Those interested in the protection of their civil rights will probably cringe at the implication of being presumed guilty instead of innocent until proven guilty.
- Yet most disturbing of all is the fact that a financial institution is specifically prohibited – by law – to inform you that your activities have caused them to instigate an investigation and have resulted in the compilation of data and passing on of said information to the authorities.
- In the wake of 9/11, Title III, Section B of the USA Patriot Act was employed to amend the Bank Secrecy Act and suddenly legitimate businesses – alongside illegitimate ones – found themselves scrutinized by the banks. Involving also the Securities and Exchange Commission, brokers are now under the microscope and those with an affinity for stocks and bonds may suddenly find themselves being investigated for potential money laundering charges.