For the most part, I only use my credit card these days. However, having worked in a bank, I saw many situations where people needed to carry around large amounts of cash. Knowing how the government tracks cash is important for people that do large currency transactions with cash.
The Bank Secrecy Act of 1970
The Bank Secrecy Act, or BSA, was enacted to help the United States government track money laundering operations. Any transaction over $10,000 is recorded and reported by a bank to ensure it is in compliance with the law. Banks have very specific rules and forms required for qualifying large currency transactions.
Currency Transaction Report
For any cash transaction over $10,000, the bank is required to report the activity in a CTR, or Currency Transaction Report. CTRs are generally straight forward. While some people might be buying a car in cash, which is perfectly legal, if someone has a series of large cash transactions, the government will flag it and investigate for criminal activity.
People cannot avoid have a currency transaction report filed by depositing a series of smaller transactions. Banks track cash deposits by law, so even if you deposit two $5,000 transactions, five $2,000 transactions, ten $1,000 transactions, or so on, the bank is required to file a CTR.
Monetary Instrument Log
Negotiable instruments, such as a cashier’s check or traveler’s check, can be used to move money around under the cloak of secrecy. To keep criminals from using them for money laundering purposes, banks report transactions or series of transactions over $10,000 in cashier’s checks, traveler’s checks, or money orders in a MIL.
Drug dealers and other criminals sometimes try to use pre-paid cash cards or a combination of cashier's checks, traveler's checks, or money orders to avoid having a CTR filed. The government is on to this, and the companies that sell these instruments know that people may try to use them for money laundering. Sorry bad guys, it won't work.
Suspicious Activity Report
In my time as a banker, I filled out one Suspicious Activity Report, or SAR, when a customer had a large series of cash transactions over a relatively short period of time. If a liquor store or tobacco shop owner brings in a lot of cash, that makes a lot of sense. If an individual brings in a ton of cash, it might raise red flags. If someone brings in a total of $9,990 every three months, it might look like they are trying to avoid a CTR. Even if the deposits are completely legal and legitimate, it might raise a red flag for a bank.
Banks work hard to monitor for suspicious activity and actively report it to government agencies. The Patriot Act expands the reach of this regulation to assist in detecting terrorist activities.
Traveling With Currency
Outside of the risks of carrying large amounts of cash, it is important to be aware of how the government tracks cash going in and out of the country. You are legally required to declare any currency over $10,000 when traveling into or out of the United States. Other governments have similar regulations.
The TSA is specifically trained to look for large amounts of currency in addition to weapons, fireworks, water bottles, and toothpaste tubes over 3 ounces. If you are transporting $10,000 or more internationally and your travel plans originate, end, or stop over in the United States, you are required to file a declaration form.
How Money Laundering Works
Just so you have a better understanding on why we have these regulations, check out the video below on how money laundering works. It is a common practice for drug dealers, illegal gamblers, and tax evaders.
Questions or Stories?
Do you have any questions about these regulations or how the banks and governments track money laundering activities? Please share in the comments.
First posted 11/16/2011. Updated 8/9/2015