Cash in Safe Deposit Boxes - Yes or No

by Dave McGuinn

Often, questions like the following one that was posted on Bankers' Threads are asked by bankers:
"I have always understood that holding cash in a safe deposit box is illegal, yet I haven't been able to find any references to this. Can anyone point me in the right direction? What is the financial institution's responsibility if it is aware a customer is depositing large sums of cash in a safe deposit box?"

To the best of my knowledge there is no state or federal law that prohibits the storage of cash or coin in a safe deposit box.

I think this nationwide misunderstanding and confusion occurs because of a regulation published by the Internal Revenue Service. This regulation goes something like this. . . ."Consumers should never conceal cash from the United States government and not pay income tax on it."

Historically, many financial employees have heard this statement from the person who gave them their initial five minutes of safe deposit training before they were turned loose in the department. They now assume it's against the law for a renter to store cash in his or her box. As you can see, nowhere in this IRS statement are safe deposit box contents even mentioned!

To address this question, I usually give the following example in my seminars:
If all bankers took a close look at the contents of their own personal safe deposit box, they will probably find the following items. . . . Silver dollars, two-dollar bills, wheat pennies, collector coins and everyone has a few of those new "state minted" quarters. ARE ALL THESE BANKERS BREAKING THE LAW? ABSOLUTELY NOT! There is no law to break.

Many safe deposit contracts contain a specific clause that either prohibits or limits the storage of cash in a box. This clause is placed in this legal document to hopefully limit the institution's liability in case of a box content disappearance claim.

Financial institutions should never rely totally on this contract provision as their only protection against a lawsuit. During my 31 years of safe deposit consulting I have heard about, or have been involved in, many safe deposit disappearance cases where consumers stated that cash was missing from their box. In many of these cases the institutions were found guilty in a courtroom because they didn't have correct internal operation procedures or they had a dishonest employee stealing from them. In these cases the contract's "limitation of cash stored in a box" clause didn't help them.

The most recent of these significant losses just happened YESTERDAY!

A Renter will frequently ask employees if it's OK to store cash in these safe deposit boxes. They also ask if this cash will be insured against a loss by the bank or by FDIC. All employees should be trained to answer these questions carefully and correctly. The only correct answer is. . . "There is no law against storing cash in a box, and even if there was, we couldn't enforce it because we do not know or monitor what a renter stores in his or her box. Also, neither the bank nor FDIC insures box contents because without knowledge of what these contents are we would never be able to insure the unknown."

Employees should also know what their safe deposit contract says about storing cash and insurance coverage. These clauses should be highlighted and pointed out to any renter who is asking these questions.

Because of all the questions about insurance coverage and money stored in boxes, SDS created a safe deposit "Question and Answer" brochure several years ago. It answers the most frequently asked safe deposit questions.

Out of the eleven questions answered, the insurance and cash questions are specifically addressed in this brochure. Thousands of banks nationwide are now using this product and training their employees to provide it to any renter who asks a question.

First published on BankersOnline.com 7/23/01