CASH REPORTING AND MONEY LAUNDERING

On July 14, 1984, the Internal Revenue Service’s (IRS) Cash Reporting Rule went into effect. The law provides that any person, engaged in a trade or business, who, in the course of that trade or business, receives more than $10,000 in cash in one transaction (or two or more related transactions) must report such transactions to the IRS by filing Form 8300.

CASH REPORTING AND MONEY LAUNDERING

• Definition of Cash

“Cash” includes monetary instruments with a face amount of not more than $10,000 and include:

– Cashier’s Checks– Traveler’s Checks– Money Orders– Bank Drafts– Currency (Both United

States and Foreign)

CASH REPORTING AND MONEY LAUNDERING

• As an Example:The Regulations require the Company to treat monetary instruments as cash only if they have a face amount of not more than $10,000. If a customer pays for a vehicle with a cashier’s check that has a face amount of more than $10,000 (for example an $11,000 cashier’s check) it would not be considered cash under the regulations. The bank or lending institution where the customer purchased the cashier’s check is required to file a report with the IRS if one was required. Monetary instruments are treated as cash only when they are received in a designated reporting transaction.

CASH REPORTING AND MONEY LAUNDERING

• Designated Reporting Transaction- Defined as a retail sale of a consumer durable, collectable or a travel or entertainment activity.

- An automobile is a Designated Reporting Transaction.

CASH REPORTING AND MONEY LAUNDERING

• Exceptions for Certain Monetary Transactions Being Considered Cash:- If the proceeds are a loan from a Bank or Credit Union

- Company relies on documentation (e.g. loan papers) to substantiate that the monetary instrument constitutes loan proceeds

CASH REPORTING AND MONEY LAUNDERING

• IS THIS A REPORTABLE TRANSACTION?

Customer buys a $25,000 vehicle and pays using a $25,000 cashier’s check.

Reportable Transaction? YES? NO?

The cashier’s check has a face amount of more than $10,000; and is therefore not considered cash. The bank where the customer purchased the cashier’s check is required to report the transaction.

NO

CASH REPORTING AND MONEY LAUNDERING

• IS THIS A REPORTABLE TRANSACTION?Customer purchases a $30,000 vehicle and gives the Company $5,000 in traveler’s checks, a $9,000 cashier’s check and a personal check for $16,000.

Reportable Transaction? YES? NO?

The $9,000 in traveler’s checks and $5,000 currency are treated as cash. The Company has received over $10,000 in cash and must report the transaction. The personal check, no matter what the amount, is not treated as cash. Form 8300 must be filed for the $14,000 received in cash.

YES

CASH REPORTING AND MONEY LAUNDERING

• Filing Form 8300- Form completed by F&I office

- Filed within 15 days of transaction

- Company sends written notification to the customer

- All cash received within a 24 hour period is always treated as a related transaction

- Cash sales to wholesalers are not related transactions unless they occur within a 24-hour period

CASH REPORTING AND MONEY LAUNDERING

Suspicious Transactions

• Defined as a transaction in which it appears that the customer is attempting to stop the filing of the Form 8300 or there is an indication of possible illegal activity

• Use common sense to determine

“suspicious” or illegal activity

and report these to the

Company Controller

CASH REPORTING AND MONEY LAUNDERING

Structuring Transactions

• DO NOT structure payments with a customer in such a way as to avoid the cash reporting requirement

• This could constitute a violation of federal law and could result in a felony conviction

A Company employee advises a customer with $15,000 in currency to take the cash and deposit it in a checking account and then write a $15,000 personal check to pay for a vehicle.  The employee’s actions described above violate the anti-structuring provision to the regulations. The employee has committed a felony by advising the customer in this manner and the Company may be liable for an “intentional disregard” penalty for the violation. As an employee of the Company you may never suggest, in any way, how a customer should structure a payment when they are using cash.

CASH REPORTING AND MONEY LAUNDERING

Money Laundering- Violation of cash reporting can lead to violation of the federal money

laundering statutes

- It is ILLEGAL to take money you know has been derived from illegal activities treated as a related

transaction

- Severe penalties with fines starting at $500,000 and jail terms of up to 20 years

- Government has the power to seize assets and inventory

CASH REPORTING AND MONEY LAUNDERING

Enforcement- IRS is increasing enforcement of cash reporting

- IRS conducts compliance audits

- Company’s cash receipts, journals, bank deposit slips are compared to copies of Form 8300

- IRS also conducts undercover “sting” operations in automobile dealerships

Enforcement of cash reporting has become a high priority with the IRS and the Justice Department

CASH REPORTING AND MONEY LAUNDERING

AS A CONDITION OF EMPLOYMENT ALL EMPLOYEES ARE REQUIRED TO ACKNOWLEDGE AND AGREE TO COMPLY WITH ALL CASH REPORTING LAWS AND REGULATIONS AS REQUIRED BY 26 U.S.C. 6050I AND ALL MONEY LAUNDERINGSTATUTES AS REQUIRED BY 18 U.S.C. 1956.