Cash Transactions: Handle With Care!
Failure to Report Cash Transactions Can Lead to Money-Laundering Charges By Michael W. Dunagan, TIADA General Counsel Reprinted with permission from the Texas Independent Automobile Dealers Association. •
In 2011 a Texas car dealer was convicted and sentenced to 188 months in federal prison for his role in a money-laundering scheme involving the sale and purchase of vehicles with large amounts of cash from alleged drug dealers and other criminals.
level, is that some customers don’t have bank accounts. Instead of receiving payment for vehicles through traditional banking instruments, many dealers receive payment in cash or cash equivalents (more on that later).
•
In 2017 a South Texas bank is assessed a $2 million civil money penalty for not adequately assessing potential money laundering violations.
Monitoring Money Laundering
•
•
In 2012 a Texas car lot is shut down by a task force involving federal, state, and local police making allegations of money laundering involving the sale of vehicles to a purported drug dealer for cash. In 2014 two car dealers in Phoenix are charged by federal prosecutors of being involved in a moneylaundering scheme when they sold vehicles to undercover agents posing as drug dealers.
One of the realities of the car business, especially at the sub-prime
The legitimate use of cash by those who for whatever reason don’t have bank accounts has run into conflict with the federal government’s efforts to monitor criminal and terrorist activities by following money trails. But unlike regular checks written on a bank account, cash or cash equivalents don’t leave paper trails that make it possible to trace the source of funds. As a result of a government finding that drug dealers and smugglers used cash in their transactions and needed to “launder” the large amounts of cash through seemingly
legal activities, Congress enacted the Financial Crimes Enforcement Network (FinCEN). Included in the legislation is a requirement that anyone in a trade or business who receives certain large amounts of cash must report the fact to the Internal Revenue Service. After the terrorist attacks of September 2001, Congress enacted the USA Patriot Act of 2001 that increased the scope of the cash reporting rules to help trace funds used to finance terrorism. For one Dallas independent dealer, the seriousness of this law became a reality when local police, and state and federal agents “raided” his business, closed off access to the lot, and confiscated his computers and records, effectively shutting down his office and damaging his business for several days. The officers carrying out the raid, who were armed with a search warrant, refused to tell
the Front Row | wsiada.com | November/December 2020 |
9
