Can Making Small Deposits in Your Bank Account Really Get You in Trouble?

Picture this: You’re living life, minding your own business. Due to the way you earn a living, you regularly deposit small amounts of money in your bank account. 

One day, you learn that you’re being investigated by the federal government, suspected of violating the Bank Secrecy Act (BSA). Although it sounds far-fetched, it can happen. Here’s how. 

The Bank Secrecy Act

Congress passed the BSA in 1970 to fight money laundering in the United States. The federal government understood that once illegally earned money was mixed in with legitimately earned money, it would be difficult to tell that it was the result of criminal activity. 

The goal was to catch money launderers before they had a chance to “clean” the dirty money. In short, the BSA requires banks to report cash deposits of $10,000 or more. 

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What does that have to do with making regular, small deposits? Those who wished to launder their money quickly began to look for workarounds. One trick was to break large amounts of money down into small deposits so their banks would be less likely to report them to the IRS. The practice is called “structuring.”

It did not take long for banks to catch on. Soon, financial institutions began to track deposit patterns. Let’s say a person deposited $2,000 one day, $5,000 a day later, and $3,500 a few days later. Those deposits would be enough to raise a security flag and lead the bank to send a Currency Transaction Report to the IRS. 

Why your deposits may raise a red flag

It’s fair to assume that few people review their recent bank transactions to determine the total deposits. After all, most of us are less interested in deposit amounts and more interested in the total we have available to spend or save. 

It’s possible that people with absolutely nothing to hide happen to make small deposits in amounts that add up to the mandatory reporting amount of $10,000. Or, their frequent deposits may simply catch a bank employee’s attention, which can lead to a Currency Transaction Report. 

No, as long as you’re not making small deposits to circumvent the law. Structuring is considered a criminal offense. While all Currency Transaction Reports are investigated, few lead to catching actual criminals.

As long as you haven’t created multiple checking accounts and spread small amounts of money around or pulled an equally suspicious banking trick, you’re unlikely to find yourself in legal trouble. Most people who are reported for suspected BSA activity never know they were reported. 

The pressure is on banks

Failure to report suspicious activity can land a bank in serious trouble, including criminal proceedings, costly fines, damaged reputation, and even permanent business closure. Banks work hard to avoid such harsh punishments, which helps explain why reports are filed. 

As a regular, hard-working person, feel free to continue making small deposits in your checking or savings account. As long as you’re not breaking the law, there is nothing to worry about. 

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