Good afternoon! I'm looking for the penalties a bank may pay if they allow a money market account to go above the allowed withdrawls (checks) for several months. We have sent warning letters, but they are a great customer and my manager feels bad about just shutting it down.

The Bank could have to re-evaluate their reserves including in the money market accounts as demand deposit accounts. I believe not only could they have to increase the reserves, they may have to pay a penalty.

"... [M]y manager feels bad about just shutting it down."

Will your manager feel as badly if the bank's Reg. D monitoring program is cited as substandard in the next exam? Getting that citation makes bank jump through a lot of hoops to bring the program into compliance. Will your manager work on that effort?

Seriously, the bank should be trying to identify a better product to put this customer into, or call the customer (it's amazing how much better a phone call does than a form letter) to ask him to adjust his habits.

Regarding Reg D and it’s non-covered and allowable transactions with transfers from one account of the depositor to another account of the same depositor made in person, if a withdrawal transfer is made FROM an individual’s account containing a tax id number into a business account with the same signer as the individual account but an employee id number, would that be considered a covered transaction because the TIN and EIN make these accounts TWO different accounts and are not considered owned by the same depositor? In other words, can transfers be made between personal and business accounts as long as both accounts contain a like signer?
In this particular situation, wouldn't the transfer be considered to have been made to a third party because of the TIN and EIN not matching on both accounts?

Quote:

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...made in person...

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If the withdrawal or transfer is made in person it simply doesn't count, regardless of the destination of the funds.