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Smurfs and Your Bank Account
Published Date : October 25, 2016
There are no limitations on how much money you can take out of your own bank account—it is your money after all—but there are governmental reporting requirements that need to be made by banks for transactions of certain type and size. The Bank Secrecy Act of 1970 was passed to help detect and prevent money laundering by requiring financial institutions to document and report large cash transactions (over $10,000) and other suspicious activity. This involves not only withdrawals, but also deposits, currency exchanges, and purchases of traveler’s checks. These rules were put in place in order to help protect banks from being used to hide or “launder” money acquired from criminal activity such as drug trafficking, weapons trading, terrorism, prostitution, and sales of counterfeit or stolen goods or pirated copyrighted products. Interestingly, the term “smurf”—as in the popular blue cartoon character—is often used as slang for a money launderer.
In the past decade or so, international and domestic terrorism—and the potential financing of it from successfully laundered and therefore seemingly legitimate sources at reputable institutions—has only served to further heighten the concerns and issues originally addressed by anti-money-laundering laws. Even more routine and so-called victimless money laundering—without the terrorist motive—can damage the economy by skewing natural money flows, reducing money supply and causing more printing of money. This in turn can adversely affect purchasing power and ultimately lead to unwelcome inflation. In the extreme, if not controlled, this can beget hyper-inflation and harm economic activity.
Under the law, banks must consider the aggregated total of all transactions made on the same day and count them as one single amount and report this accordingly, if necessary. Even a series of otherwise allowable single day transactions made repeatedly over the course of a number of days or weeks could be enough to invite scrutiny. Banks must also report what are called “structured transactions” – such as taking out only $9,950 – which they believe are deliberately chosen to avoid triggering the $10,000 threshold amount. Even a husband and wife might unwittingly withdraw separate permissible large amounts on the same day—perhaps in preparation for a lengthy trip—and in combination trigger a red flag and a related report. Indeed, any transaction that a bank considers suspicious, regardless of size, could trigger a report especially if the activity is significantly different and contrary to one’s long-term pattern of banking behavior.
Of course, there are some sensible and welcome stated exceptions to these rules. For example, banks do not need to file a report for any transactions that occur between themselves and other banks or government agencies which thus excludes the rather common use of customer wire transfers and overnight electronic fund transfers (EFTs). Furthermore, banks can request exemptions (that must be renewed annually) to these types of reporting requirements for any regular business customers who engage in large routine cash transactions like grocery stores that regularly need large sums of cash on hand for their registers. Admittedly, all of the above issues and circumstances are not likely to impact most people, but as an informed consumer it does not hurt to be aware of these general conditions.
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Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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