Customer writes payroll checks. Those employees come in to cash their checks. Total of all cashed checks is more than $10,000. Does this require a CTR?

From the BSA FAQ:

Question 13a: A business customer of a depository institution provides payroll checks to individual employees for work performed. Each payroll check is under $10,000. However, several employees cash their payroll checks individually on the same business day, which results in an aggregate cash out from the business customer’s account in an amount exceeding $10,000. Would the institution be required to file a CTR, if no one person received an amount in excess of $10,000?

Answer 13a: The financial institution would not need to file a CTR because it would not be involved in a single cash transaction (or multiple cash transactions for which a duty to aggregate would arise) of more than $10,000. A financial institution must treat multiple transactions in currency as a single transaction if the financial institution has knowledge that the multiple 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. According to the facts described above, the cashing of checks would be conducted by or on behalf of each individual employee (rather than the business on whose account each check is drawn), and no one employee would be cashing more than $10,000 in a single transaction or in multiple transactions during the same business day.

Question 13b: Would a CTR be required if several individual employees endorsed their respective payroll checks (all individual payroll checks are under $10,000 but combined they aggregate to an amount that exceeds $10,000), and made the checks payable to one employee who, in turn, cashed them at a financial institution for the purpose of distributing the proceeds back to the individual employees?

Answer 13b: A CTR would be required in this instance because one person is receiving more than $10,000 in currency.(10/2001)

So in the scenario described in question 13b, would you file the CTR on the one person who came in to cash the checks for the other employees? Would you include somehow the other employees who the checks are made out to?

What if an employer writes checks for his employees, has them endorse the checks, comes to the bank and cashes them, and then takes the cash back to the employees?

I think the key here is did any one person walk out the door with more than $10k in cash and if so then you would need to file a CTR for that one person acting on behalf of all the other's whose check s/he cashed for those transacations as well as the one check he cashed for himself.

I don't see a way around it. If there are 11 checks, each for $1,000, there are 12 persons to be reported on the CTR, and you don't have information on 11 of them. I see a phone call to the business saying that you can't complete the transaction without the needed information on the 11 payees, and that the employer needs to find another way to keep his people away from the bank on their lunch breaks.

Can you say "Direct Deposit" Mr. Employer?

Then, I would wonder if allowing this practice has contributed to:
* a padded payroll,
* employment of undocumented workers, or
* human trafficking

and institute a policy of not cashing two party checks or not cashing more than "X" number of two party checks in any transaction. After I got the policy change in place I would think about how I would explain why the bank voluntarily facilitated a transaction it thought was suspicious in the SAR discussion.

I wanted to piggyback on this one and see what we need to do:

We have this situation now.....employee checks were cashed by bookeeper (endorsed by employee and secondarily by owner of business). The bookeeper got all the cash and distributed to the employees. This type of activity has been occurring because this is a 24 hour dairy operation and the owner does this as a service for his employees. Now, does it seem a little weird and is there a better way to do it......YES! Nevertheless, we have this situation where the transaction wnet over $10,000 because there was a personal check cashed in there as well. I know the CTR should be completed on the person who got the cash and information on all who was cashed for should also be on there. However, of course we don't have info on all these individuals and probably can't get most of it.......some don't even have drivers licenses (is this another issue.....yes, but I have to get this CTR done). If we don't have the ID info, what should we do?

There really isn't a list of alternatives. You need to obtain as much information as you can then complete the CTR with the information you have. You will apparently check "unknown" several times. File it in a timely fashion.

I suggest you write a memo to file explaining how this happened and, hopefully, how you will not let it happen again. If your regulator or auditor questions the filing then at least you can show you knew it was an issue.

You are going to checking the unknown box a lot.

Thanks so much fellows.......I do appreciate your thoughts.