Cash deposits from Gas Station

I have been filing SARs on a customer that is bringing in over $200,000 in cash each month. All deposits are just under $10,000. This is a small gas station owner. We have another customer that averages over $300,000 in cash deposits each month, but we regularly file CTR's on that business (gas station). These are not large gas stations. What is normal behaviour for gas station bank customers out there? It seems most people pay by credit card for their gas purchases. Has anyone else experienced this amount of cash deposits? This customer also does Lotto, but I can track those cash deposits. Thanks!

It's really not unusual for a gas station, depending on location, to generate lots of cash.

I think the responses you get to your post would be much more useful to you if you indicated the part of the country you're in and whether you have a lot of tourists, etc.

Several years (and banks) ago, we had a guy who would regularly turn over half a million in cash each month. So much so that we could almost maintain our supply of $5, $10 & $20 bills for all 6 of our branches each week without supplementing from the Federal Reserve.

Of course, he had four gas stations along a toll road, and his were the only stops you could access without paying the toll, getting off the highway, and finding a local station.

I agree with John - location & traffic volume are key to answering your post.

I am in almost the exact same position. We have several convenience store / gas stations that generate a lot of cash. Most we have been able to place on our exempt list, after carfully checking their lotto sales to make sure they are under 50%. But we have one that obviously structures their deposits to avoid CTR's. The cash they bring in is in line with the other stores of it's size, but they structure their deposits - creating a huge pain for this BSA Officer!

Without tipping them to the fact that you have (I assume) filed SARs on them (or will), have you considered informing them (in writing) that structuring deposits is illegal? That might get them to stop doing so. If not, it would at least give a prosecutor the stopper if they claimed the ignorance defense.

These gas stations are located in the Chicago suburbs and are in no way located in a tourist area. They are basically neighborhood gas stations but are near a major interstate. I still find it unusual that people still pay cash for gasoline, especially in the quantities we are seeing. One of the customers we have is also now structuring cash through his personal checking account and remitting funds to what looks like one of his suppliers. Would you recommend closing the account? What would the Examiners recommend regarding this? I have been filing SAR's every 90 days. Maybe a letter to this customer is a good idea.

At some point, you should consider the costs of the extra monitoring that these accounts are requiring. Perhaps you should have an in-house account analysis that factors in the cost of researching all their cash transactions and completing all those SARs. Not to mention the cost of counting all that cash -- and that is obviously a cost we bankers often ignore.

When you finish your analysis, decide if it's still an account you want to keep. If not, sever your relationship. Who needs the aggravation if it doesn't pay?

I have thought of a letter to the customer but have not yet been able to come up with anything that I feel would not be advising them SARs can or have been filed. I feel the need to tread very lightly when talking to customers about structuring, maybe I am being overly cautious.

If you have already filed a SAR on your Gas Station and they are continuing to structure there transactions you should think about closing the account.

Remember you must file follow-up SARs every three months if they continue to structure their cash desposits.

The BSA Law prohibits you from explaining it to your customers. I would think writing a letter to your customer telling them to stop structuring their cash deposits would be a violation of the BSA law.

Writing a structuring notification letter to your Gas Station Customer is of course your decision.

However, I would suggest that you think how you will explain such a "structuring notification letter" to your federal regulator during your next BSA audit.

Consider this if they are structuring their deposits to be below the established BSA currency limit, they know what the BSA law says and don't care.

That is exactly why I haven't sent a letter or attempted to explain that structuring is illegal. We have also considered closing the account, but what reason would we give for closing an account that is never overdrawn and shows no other signs of suspicious activity? Has anyone actually just closed an account without giving the customer a reason?

I feel that customers who structure only partially know the BSA laws. They know if they bring in over $10K we file "that form" but they don't know about the form we fill out when they structure their deposits. I had someone call our call center last week and asked how much cash he could deposit before we had to fill out the form that would make people think he was a drug dealer. I always try to explain to people that the CTR that we file will be lost in a sea of millions of other CTR's and will likely never be looked at again. I also tell them, without getting into specifics about SAR's and structuring, that it looks far worse if they try to avoid a CTR.

The National Association for Bank Security offers a brochure for customers called "Facts You Should Know About Cash Transaction Reports and Records Required by Federal Law". The brochure is designed to avoid assisting the customer in structuring their deposits. It is something I have been meaning to look at for some time, has anyone else used it?

In sort of reverse order:

The Profit Protection brochure on CTRs is a real good way to allow your staff to inform customers of the law without coaching them on structuring.

I think you could put essentially the same information into a letter that you direct to customers who might be structuring.

We have an internally-developed fact sheet we can give customers that is similar to the brochure, and includes the following:

It is a violation of federal law and regulations to:

• cause or attempt to cause the bank to fail to file a CTR;
• cause or attempt to cause the bank to file a CTR containing a material omission or misstatement of fact; or,
• structure, assist in structuring, or attempt to structure transactions with the bank. In this context, “structuring” refers to acting alone or with others, and through one or more financial institutions on one or more days to arrange or conduct transactions, in any manner, for the purpose of evading the currency transaction reporting requirements.

We don't think this language crosses the line into coaching, and we'd feel comfortable including that language in a letter, too.

As for closing the account, you could say "due to account activity which appears to us to be planned to avoid federal requirements for the reporting of large cash transactions." Or you could simply say "because we elect not to do further deposit account business with you." No one said the letter would be easy for the customer to swallow, but check with counsel to see what they recommend. My preference is the first option, since the "because we don't wanna play no more" approach is really only effective if the customer really knows why (overdrafts, regular cash differences in night bags, failure to behave as a customer ought to (account statement verification, etc), and so on.

John,

I really like the wording that was used in your fact sheet, I have often thought of putting something together like that to give to customers who inquire. My fear is that if I put it together as opposed to purchasing a brochure, auditors or regulators will pick the wording apart and I might fall (or be pushed!) into the "advising the customer how to structure" hole.

It is our policy to close accounts when SARs are filed. We simply tell the customer that we will no longer be able to service their account. We generally allow ten days for outstanding items to clear and then they can either come in to close the account, or we mail them a check. If they have electronic activity, especially merchant credit card services, we will allow a little longer to permit sufficient time for them to reestablish service elsewhere.

We are rarely pushed for an explanation. I'm sure they know why.

If we do allow an account to remain open, we document the specific reason in our file.

If you think that there really is something "funny" going on here (to raise that kind of cash), the next time you file an SAR, include the information that you are going to close the account within 30, 60 or 90 days. It might prompt an investigation. I have heard of this working from someone who actually did it.

Way back to the original question - we have a customer who is doing the same thing - a small 4-pump station, with no additional sales except cigarettes, in a downtown area where not a lot of people live, is generating more cash than a large customer with 4 or 5 full-service convenience stores that include 10 or 12 pumps.

I can track the funds going out of the account to a supplier that looks legitimate. The customer is not structuring in any way. What else can we look at to determine if this really suspicious, or just an indicator that his clientele deal in cash only?

Have you tried the eyeball test? Drive over there & buy some gas. Are the pumps crowded? Maybe he's undercutting the competition on a regular basis. Or, if the station doesn't have the debit / credit card readers, that may drive more volume towards cash payments. I'd recommend going over there & checking things out.

Great advice. There was a restaurant that was making piles of cash. When the banker went by to check out this incredible operation he saw a small 10 - 12 table restaurant. Suspicious? No, impossible. He filed an SAR and viola a nice money laundering bust. (I may not have the exact facts, but it is close to what happened.) As an attorney, I have learned that sometimes you gotta get out of your office and check things out yourself.

We too had a restaurant situation (family owned & operated). The initial deposits appeared to be appropriate for the business. After a few weeks - every member of the family started bring cash in many times through out the day. Turns out food was a minor part of their business - food out the front and drugs sold out of the back of the restuarant.
So I strongly agree with the previous advice - to physically check the establishments out!

I, too, saw several "front company" cases over the years and totally agree that a visit is order before you consider a SAR.

One business customer looked really suspicious based on general knowledge of the company and the transactions we were seeing. Our security officer dropped by the do some "shopping" and found the customer was engaged in a humongous sale with rock bottom prices and an overflowing parking lot. We put the SAR back in the holster.

The other thing to consider about cash payment for gas, it also depends on the clientel at the station. While I don't want to get into race and national origin, fact of the matter is that some cultures prefer dealing with CASH and not credit cards.

While we may be from a culture that is used to using credit cards for gas, other people (cultures) would never think of using a credit card for gas.

I've been away from the computer the last couple of days, so I haven't had a chance to respond that I have scoped out this business. I've even purchased gas there on several occasions. The station is busy, but not just swamped with customers. It does reside in an area of town where the culture is to pay with cash instead of credit cards.

I'm still conflicted about whether the activity is suspicious, however. This one is just tough!

What's the trend look like over time? Does the day-of-week pattern look typical for this type of business? Did the cash level creep up over years, or jump quickly? How about the mix of the denominations--typical for this type of business? Does the business co-mingle lottery ticket sales or anything else that would account for bigger bucks?

As the original poster of this thread, I followed your wise advice and visited the gas station. At 9:00 P.M., I had to wait to fill up. The place was very crowded. While they did accept credit cards, I observed most customers paying in cash. It is across the street from a train station and in an area where perhaps most of the clientele would pay in cash. They also sell lottery tickets. Thank you for all of your good advice. I feel much better about this customer.

Not to take anything away from Richard, but in this thread, I think that Bart Jonker first made that suggestion.

Go, me!

Seriously, the point about lottery ticket sales tells me a lot. I'll bet you see higher cash deposits when the jackpot goes up...

Zaibatsu, I don't think Anon was referring specifically to Richard's advice when he used the term "your advice". I think he was using "your" generically. I can see where you might make that inference since he was responding to Richard's last post. However, especially when reviewing threads in the flat mode (mine is set to flat mode by default), you would typically find someone responding to whatever message appeared last in the thread. I don't think it was intended as a slight to Bart by being a response to Richard.

Whatever. I was just unecessarily trying to give proper credit to Bart. Go him!