When transferring money between bank accounts, many people wonder how much they can move without triggering reporting requirements to the IRS or other government agencies. The rules on reporting cash transactions and suspicious activity can seem complicated, but this guide breaks down the key regulations in simple terms.
Bank Secrecy Act and Anti-Money Laundering Rules
Banks and other financial institutions in the United States are required by law to assist U.S. government agencies in detecting and preventing money laundering. The main laws governing this are the Bank Secrecy Act and anti-money laundering (AML) regulations.
These rules require banks to monitor transactions and report any suspicious activity that may indicate criminal activity or tax evasion. Banks are also required to report cash transactions over $10,000.
CTR Reports for Cash Transactions Over $10,000
Under the Bank Secrecy Act, banks must file a Currency Transaction Report (CTR) for cash deposits, withdrawals, exchanges of currency or other payments over $10,000. Some examples include:
- Depositing more than $10,000 in cash into a bank account
- Withdrawing more than $10,000 in cash from a bank account
- Exchanging more than $10,000 in currency from small bills into large bills (or vice versa)
- Using cash to purchase cashier’s checks, money orders, traveler’s checks or other negotiable instruments totaling over $10,000
- Using cash to make a loan repayment of over $10,000
It does not matter if the transaction is conducted in one lump sum or through multiple smaller transactions. If the total exceeds $10,000, it must be reported on a CTR.
Suspicious Activity Reports (SARs)
Banks must also file a Suspicious Activity Report (SAR) if they detect transactions that may indicate money laundering, tax evasion, fraud or other criminal activity. This includes complex or unusual transactions that don’t appear to serve any legitimate purpose.
There is no minimum dollar threshold for SAR reporting – any suspicious transaction must be reported, regardless of the amount.
Exceptions and Ways to Avoid Reporting
While the $10,000 cash transaction reporting rule is straightforward, there are some exceptions and legal ways to transfer sums over $10,000 without triggering reporting:
Bank Check or Wire Transfer
Banks only have to report cash transactions over $10,000. So you can transfer unlimited sums between accounts by wire transfer, cashier’s check, money order or other non-cash methods without causing any reporting.
Deposit Cash Across Multiple Branches
The $10,000 threshold applies per transaction at a single bank branch. Some people attempt to break up cash deposits across multiple branches to avoid hitting the $10,000 mark at any one branch.
However, this structuring activity is illegal and banks are required to report any suspicious patterns like this. The safest way to legally deposit over $10,000 cash is to fill out the CTR reporting form.
Deposit Cash on Separate Days
You can also avoid triggering CTR reporting by breaking up cash deposits across multiple days. For example, depositing $5,000 one day and $6,000 the next would not require reporting. However, splitting deposits close together may still raise suspicion and force the bank to file a SAR.
IRA or Securities Account
The Bank Secrecy Act only applies to banks and financial institutions. Non-bank entities like brokerage firms and IRA custodians generally do not have CTR reporting requirements.
So you may be able to deposit unlimited cash into a brokerage account or IRA without causing any reporting. However, securities firms do have to report suspicious activity under AML laws.
Life Insurance Purchase
Buying a large life insurance policy with cash does not trigger CTR reporting. This is because life insurance companies are not subject to Bank Secrecy Act requirements.
But insurance companies do have to monitor for suspicious activity and report to FinCEN under AML regulations. So unusual cases may still get flagged.
Real Estate Purchase
Similarly, real estate transactions do not require CTR reporting, even if you pay the entire property cost in cash. But real estate firms are also subject to FinCEN AML rules, so suspicious activity could still be reported in a SAR.
Cashing out over $10,000 in gambling winnings also does not trigger CTR reporting, since casinos are exempt from the Bank Secrecy Act requirements.
However, casinos must monitor gambling activity and report suspicious transactions to FinCEN. Unusually large cash outs from gambling may merit a SAR filing.
Reporting Thresholds for Foreign Bank Accounts
The reporting requirements discussed so far all pertain to domestic bank accounts. There are additional reporting rules for U.S. citizens and residents with foreign bank accounts.
If you have foreign bank accounts with an aggregate value exceeding $10,000 at any time during the year, you must file a Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is filed separately from your tax return, electronically through the Financial Crimes Enforcement Network (FinCEN) BSA E-filing System. The annual deadline is April 15.
FATCA Form 8938
In addition to the FBAR, you may also need to report foreign assets on Form 8938, Statement of Specified Foreign Financial Assets. This form is filed along with your federal tax return if the total value of your foreign accounts exceeds certain limits:
|Living in U.S.
|Living Outside U.S.
|$50,000 on last day of tax year or $75,000 any time during year
|$200,000 on last day of tax year or $300,000 any time during year
|Married Filing Jointly
|$100,000 on last day of tax year or $150,000 any time during year
|$400,000 on last day of tax year or $600,000 any time during year
Reporting for Businesses
The reporting requirements discussed so far apply to individuals and personal bank accounts. Businesses (corporations, LLCs, partnerships, etc.) have some additional considerations.
EIN Deposits Over $10,000
Just like personal accounts, cash transactions over $10,000 into or out of a business bank account require CTR reporting. This applies even if the business has an Employer Identification Number (EIN) rather than a personal Social Security Number.
For businesses with multiple accounts, the $10,000 threshold applies per account. So spreading cash across accounts does not avoid CTR filing.
Businesses that have aggregated cash balances across multiple accounts under the same EIN may qualify for a higher CTR threshold of $100,000. In this case, cash transactions are not reportable until they exceed the $100,000 mark.
Suspicious transactions related to business accounts must also be reported on SARs when appropriate, just like with personal accounts.
Penalties for Not Reporting
There are civil and criminal penalties for failing to comply with Bank Secrecy Act reporting requirements. This applies both to individuals who avoid reporting and banks who fail to report transactions appropriately.
Failure to file CTRs or SARs can result in civil fines of $25,000 per violation for banks. Individuals who cause reporting violations can be fined up to $500 per violation.
Willfully failing to file CTRs or SARs, or structuring transactions specifically to avoid reporting, can be charged as a federal criminal offense. Penalties include:
- Up to 5 years in prison
- Fines up to $250,000 for individuals or $500,000 for corporations
- Criminal forfeiture of the funds involved in transactions
Banks are required to report cash transactions over $10,000 and any suspicious activity to the government under the Bank Secrecy Act and anti-money laundering regulations. While these rules are aimed at criminal activity, ordinary individuals can also get caught up in the reporting process.
If you need to transfer large sums of money between accounts, you have a few options to avoid triggering reporting requirements, such as using wire transfers or cashier’s checks. Breaking up cash deposits across multiple days or bank branches can also prevent hitting the $10,000 threshold. Keep in mind that any unusual activity may still get flagged as suspicious by the bank.
Talk to your financial institution to understand their policies and stay compliant with federal reporting rules. Be aware that penalties for non-compliance can be severe for both individuals and banks involved in unreported transactions.