If you plan to deposit $10,000 or more into your checking account, there are a few things you should consider first. By law, banks have to report deposits that exceed a certain amount.
Not only that, but many bank accounts come with maximum deposit restrictions. You may also be subject to certain fees when making such a large deposit. If you frequently make large deposits, you should also watch out for any potential scams or fraudulent activity. But even if this is a one-time thing, it’s still important to know about these factors and how they might affect you.
Banks Must Report Large Deposits
“According to the Bank Secrecy Act, banks are required to file Currency Transaction Reports (CTR) for any cash deposits over $10,000,” said Lyle Solomon, principal attorney at Oak View Law Group. CTRs typically include the name of the individual, their account number, Social Security number and taxpayer identification number — all of which are verified and recorded by the bank.
Banks must file CTRs to the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury. Some banks will do this manually, while others will automate the process.
“The creation of a CTR does not mean that your account will be frozen, nor that the Men in Black will be visiting your home,” said Herman (Tommy) Thompson Jr., CFP, ChSNC, ChFC certified financial planner at Innovative Financial Group. For banks, it’s considered standard procedure and isn’t a cause for concern if the deposit is legitimate.
These procedures exist to help prevent money laundering, counterfeit deposits and similar financial crimes from occurring. By requiring banks to report deposits of $10,000 or more, the government can more easily keep track of monetary transactions. As long as your deposits are legitimate, you won’t have anything to worry about.
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Structuring Is Illegal
Some people will try to avoid the federal cash-reporting rules by making smaller deposits that total $10,000 or more over a short period — say, a few days or weeks. This is known as “structuring” and is considered illegal. Structuring is essentially the “practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports, according to the IRS,” said Solomon.
Sean K. August, CEO of The August Wealth Management Group, added to this by saying that “depositing $8,000 in an attempt to avoid the $10,000 AML (Anti-Money Laundering) limit is a form of structuring, which is also illegal. If the bank suspects that you are trying to avoid the $10,000 limit by making multiple deposits of less than $10,000, they may still report the transaction to FinCEN, and you may face penalties and legal consequences.”
If you make multiple smaller deposits to avoid a CTR, your bank could file a Suspicious Activity Report (SAR). Once received, FinCEN will investigate the activity to determine whether your account is involved in any fraud, money laundering or terrorist funding. Your bank is not required to notify you of this.
You May Need To Provide Additional Documentation
“You may be asked to provide additional information about the source of the funds, such as invoices, receipts, or other documentation,” August said. Providing this information can also help the government identify potential red flags, such as illegal or fraudulent activity. It’s a good idea to keep records of any transactions over $10,000 for tax-related reasons.
Businesses Must File Form 8300
By law, individuals, businesses and trades must file Form 8300 to the IRS within 15 days of receiving a cash sum of $10,000 or more. This form is meant to help prevent money laundering.
Everyone involved in the transaction will also need to provide a written statement to be filed along with Form 8300. If you are required to file but do not, you may face criminal or civil penalties.
Your Bank Account May Have Limits
Certain bank accounts come with a maximum deposit limit. Each institution has its own rules on this. For example, some banks might have different limitations based on if the deposit was done by cash or check.
Verify with your bank that you can deposit $10,000 or more into your account. “Depending on your bank and the specific amount you have, you may be charged fees or penalties for making large deposits,” Solomon said. Review your account’s terms and conditions or ask your bank about potential fees before depositing the money.
Not All Bank Accounts Are Secured
If you’re planning to deposit large sums of money into a bank account, make sure it’s secured. Any bank you use should be FDIC-insured. This means the money in your accounts — checking, savings, money market, etc. — is automatically protected up to a certain amount (usually $250,000 or more) against bank failure. While the FDIC does not insure financial losses caused by fraud or theft, your bank should have other safeguards in place to secure your money.
Watch Out for Scams and Fraud
Unfortunately, scams and fraudulent activity are rather common when dealing with large sums of money. “Always verify the legitimacy of the transaction and the source of the funds before depositing the money,” August said.
There are several common types of scams out there. Confirm where the money is coming from, especially if it’s in a large amount. “If the source of the funds is unclear or suspicious, be careful,” Solomon said. “For example, if someone offers to pay you a large sum of money for a service or product, or if you receive an unexpected windfall from an unknown source, it’s important to be cautious and investigate the situation further.”
If you receive a check, make sure it’s legitimate as well. Some scammers will send a check for you to deposit and ask you to send back some of that money. By the time either you or the bank realizes it was a fraudulent check, it’s often too late and your money’s already gone.
Availability of Funds
After depositing a large amount of money, it’s natural to want to know when you’ll have access to it. This depends on the deposit type and the bank’s policies.
“Large transactions usually have a hold period of 2-7 days to verify the authenticity of the check and the ability of the payor to meet the obligation,” Thompson said. “A bank can make the hold longer under special circumstances, but that is fairly rare.”
Cash deposits might be available more quickly. Checks, meanwhile, might take several days to clear and for the funds to show up in your bank account. When in doubt, contact your bank and ask when the money will be available.
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