Imagine this: you live your life, mind your own business. Because of the way you earn your living, you regularly deposit small amounts of money into your bank account.

One day, you find yourself under investigation by the federal government, suspected of violating the Bank Secrecy Act (BSA). While it may sound far-fetched, it can happen. Here’s how.

The Bank Secrecy Act

Congress passed the BSA in 1970 to combat money laundering in the United States. The federal government understood that once illegally earned money was mixed with legitimately earned money, it would be difficult to say that it was the result of criminal activity.

The goal was to catch money launderers before they had a chance to “clean” the dirty money. In short, the BSA requires banks to report cash deposits of $10,000 or more.

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What does this have to do with making small, frequent deposits? Those who wanted to launder their money quickly looked for solutions. One trick was to break up large sums of money into small deposits so their banks would be less likely to report them to the IRS. This practice is called “structuring.”

It didn’t take long for banks to catch on. Soon, financial institutions began tracking deposit patterns. Say someone deposited $2,000 one day, $5,000 the next day, and $3,500 a few days after that. Those deposits would be enough to raise a security flag and prompt the bank to file a Currency Transaction Report with the IRS.

Why your deposits could raise a red flag

It is reasonable to assume that few people look at their recent bank transactions to determine total deposits. After all, most of us are less interested in deposit amounts and more in the total we have available to spend or save.

It’s possible that people with absolutely nothing to hide are making small deposits in amounts that add up to the required reporting amount of $10,000. Or their frequent deposits may simply attract the attention of a bank employee, which could result in a Currency Transaction Report.

No, as long as you don’t make small deposits to circumvent the law. Structuring is considered a criminal offense. While all Currency Transaction Reports are investigated, few lead to the capture of actual criminals.

As long as you haven’t set up multiple checking accounts and spread small amounts of money around or pulled off an equally suspicious banking trick, you’re unlikely to get into legal trouble. Most people who get reported for suspected BSA activity don’t even know they’ve been reported.

The pressure is on the banks

Failure to report suspicious activity can land a bank in serious trouble, including criminal proceedings, expensive fines, a damaged reputation, and even permanent closure. Banks do everything they can to avoid such severe penalties, which is why reports are filed.

As a regular, hardworking person, feel free to continue making small deposits into your checking or savings account. As long as you are not breaking the law, there is nothing to worry about.

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