RSK.IQ Question of the Week 5/2/16

When Should Deposits of Commonly Owned Business be Aggregated for the CTR?

Issue/Inquiry

The Bank has a customer who owns two businesses, both of which are in the food industry. He typically makes cash deposits through the night drop. Yesterday, he deposited $8,019 for one business and $2,000 for the other in the night drop.  Would the Bank need to file a CTR for the aggregated cash total of $10,019 because the deposits were made together in the night drop?

Response Summary

Multiple deposits should be aggregated for CTR purposes if they were made on behalf of the same person. Whether deposits made to a night drop for businesses owned by the same person should be aggregated does not depend on the method of deposit, but on whether they were made on the same day and on behalf of the same person. Businesses which are separately organized are presumed to be independent, so the deposits would not automatically be aggregated simply because they are owned by the same person. The presumption of independence, however, can be rebutted, based on information developed by the Bank in the ordinary course of business as to whether the organizations are, in fact, operating independently. If the businesses are not being operated independently of each other, then aggregating the deposits may be appropriate.

Response Detail

FinCEN’s regulations implementing the Bank Secrecy Act require the Bank to aggregate multiple currency transactions, if the Bank has knowledge that the transactions are by or on behalf of any person and result in cash in or cash out totaling more than $10,000 during any one business day. 31 CFR §1010.313.

In this case, the owner of the business made a deposit for each business at the same time through the Bank’s night drop. Whether the deposits should be aggregated, however, does not depend on the method of deposit but on whether they were made on the same day and on behalf of the same person.

If the two businesses are owned by the owner in a common enterprise, then the currency transactions will have been “by or on behalf of any person” and should be aggregated, since they were made on the same day. If the organizations are operated separately and independently of each other, then they should not be aggregated.

Multiple businesses may share a common owner. If the businesses are separate business entities, and have been separately organized and registered with the state of their organization, the presumption is that they are independent. This means that the transactions should not be automatically aggregated as being on behalf of one person, simply because the businesses have common ownership.

However, this presumption is a rebuttable one. It is up to the Bank to determine, based on information obtained in the ordinary course of business, whether businesses which share one or more common owners are, in fact, being operated independently. If the Bank determines that the businesses are not operating independently or separately from one another, the Bank may also determine that aggregating the transactions of the businesses is appropriate because they were made on behalf of the same person(s); which is to say, the owner(s) of the business.

Factors indicating that the businesses are not operating independently of one another would include:

  • The businesses are staffed by the same employees and located at the same address
  • The bank accounts of one business are repeatedly used to pay the expenses of another business
  • The funds of the businesses are continually commingled
  • The business bank accounts are repeatedly used to pay the personal expenses of the common owner

If the Bank determines that two businesses having a common owner are not independent of each other and that their transactions should be aggregated, and if the aggregating of the transactions results in a total of $10,000 or more, it should file a CTR listing the businesses in separate sections identifying the person(s) on whose behalf the transactions are conducted. The remaining sections of the CTR should be completed as per the instructions. FinCEN, Currency Transaction Report Aggregation for Businesses with Common Ownership, FIN-2012-G001; FinCEN Ruling 2001-2.

This entry was posted on Monday, May 2nd, 2016 at 3:00 pm.

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