Say someone owes 15K to their credit card.
Every day they send a $900 money order in as payment.
Every day they do this for weeks until the debt is paid off.
Does this kind of odd thing raise red flags? If so, what happens?
Second scenario: same 15K debt on CC. Sends in a check for 20K. Does this kind of transaction get reported to the IRS because it is more than 10K?
I don’t know why the first scenario would be a problem. Someone is paying off a CC debt legally as far as I can see unless I’m missing something.
The IRS isn’t monitoring every monetary transaction in the US. If someone overpays a CC debt they will get a refund sent to them automatically. Again, I’m not sure why this would raise any red flags… unless I’m missing something.
My understanding is that cash transactions over $10,000 get reported to the IRS. Checks over that amount would not trigger any reporting requirements.
None of that gets routinely reported to the IRS, however, the IRS can get it whne/if they need it.
Correct. Note that Money order purchases over a certain amount are logged.
I don’t. I get a credit on my account and it stays there until I charge an amount equal to or greater than the credit or I request a refund.
These questions, BTW, aren’t about me. Someone had told me about these things are they just seemed odd. The $900 payments tell me they are trying to avoid the reporting requirement when purchasing $1000 or more worth of money orders.
The daily money orders will trigger a red flag with the money order company.
There’s a time limit to this. If you are in credit it carries forward for a month or two, but if you are still in credit after a certain amount of time they must refund you.
Edit: it’s 6 months.
Depending on where and how the theoretical $900 money orders were purchased is possible that some red flags would be thrown up during that part of the transaction.
Knowingly avoiding triggering reporting thresholds by making many small transacting instead of one large transaction is known as “structuring”, and an observant banker or other person selling the money orders is supposed to report suspicious activities like this on a form known colloquially as an SAR, suspicious activity report. Then you’ll get a visit from someone asking why you’re doing your transactions that way. You might have a good reason. You get paid daily in cash, perhaps, and don’t want to keep it on you.
The credit card company, however, probably couldn’t begin to care less.
But in what way? And what will they do about t?
When buying a M.O. for that amount it is anonymous. When they start getting cashed and the company notices it what could/would they do?
But theres a zillion stores and post offices selling money orders anonymously. If odd guy is buying one every day at a different place how would any one outlet ever know?
Yes , it’s anonymous - but if I’m buying a $900 money order everyday at the same place, the employees will start to recognize me pretty quickly just as coffee shop employees will recognize someone who comes in everyday. Of course, someone who is deliberately trying to avoid an SAR (or other, similar paperwork) will probably not buy the money order from the same place every day.
Money orders are traceable. You buy 900 dollars of money orders once a week from walgreens. Red flag. ABC federal agency looks into it. Sees that that all go to Citibank Visa. They also see payments from western union, 7-11, post office money orders.
Yes, they can do so, and the MO company may sent the IRS a SAR.
Generally, not for anything under $1000. Since $3000+ transactions must be logged, we looked for transactions just under $3000, say in the $2500- $2999 range.
But not for $900.
No. Not even close. $900 a day? Ok, could be. $900 weekly is nothing. I would look for $2500 weekly.
That’s absolutely true, and if there’s a way to track them in that instance I’m not familiar with it. I was more thinking on the vein of buying them daily at one place.
I’m not the one doing it.
What I don’t get is why they don’t just save the money until the end of the month and just send a larger payment in the form of a cashiers check. The method being used screams somethings up to me.
Or the guy is just weird. Could be that.
The only thing that makes sense to me is that he both
I’ve known people who do something similar (not involving money orders and smaller amounts of money) making a $500 payment to their mortgage every Friday rather than just paying the $2000 all at once. Not because the interest will be less than if monthly payments are made, and not because this results in making an extra payment per year - just because if he doesn’t pay the $500 on Friday it will be gone by Tuesday.
This. We have no idea what constitutes a transaction that triggers an SAR. All we know is that if it attracts the attention of the IRS or other TLA (Three-Letter Acronym) organization, they may investigate and look for patterns. You might buy the MO from a Walgrens or bank branch where the employee is on loan from another store and recognizes you as having done this twice - or is gossiping with a different branch’s employee…
The other problem, as mentioned, is - then what? if you pay your mortgage with money orders from all over Hell’s Half Acre, the bank where they are deposited may notice. Ditto for car loan payments, credit card payments, etc. As soon as you do large amounts or regular payments using those MO’s, the risk is that the people doing the processing will wonder and possibly file an SAR as a CYA.
the biggest challenge of money laundering is to turn pallets of cash into plausible income (to the IRS) you can spend on the luxuries of life, without attracting attention. Buying Money Orders only gets you halfway there. Using them is the next challenge.
As others mention, deliberately structuring transactions as a series of smaller amounts so as to avoid the attention of the government is the crime of “structuring”. Like every other financial trick, there’s someone in government who has though of it before now and there’ probably a way to detect it.
Money orders, like prepaid credit cards, are suspicious in themselves precisely because they can be anonymous means of turning cash into electronic money.
Daily interest at 29% (not an uncommon credit card interest rate) on $15k is ~$11. USPS money orders for $900 cost $1.70, so buying one every day you have $900 is actually financially optimal compared to saving it up.
Well, I do. But yes, it varies depending on the financial institution.
And yeah, $900 per day instead of $15,000 all at once would be structuring- IF you started with $15000, and broke it up to avoid any sort of limits. Say you got paid weekly and owned $12000. So you take $3000 out of your paycheck* every week and pay. That is not structuring.
It goes without saying - having a number of small-ish transactions for legitimate reasons is … legitimate. However, if the authorities conclude you deliberately broke up transactions to avoid triggering a report then it is structuring and the money can be seized and you can be charged.
There are plenty of stories about perfectly legitimate money being seized for structuring. leaving the victims to argue with the government. In one notorious case the bank teller advised the restaurant owners that it would be simpler to break up weekly restaurant deposits into less-than-$10,000 amounts so she (the teller) would not have file paperwork about large cash transactions. They eventually got their money back and accounts unfrozen too late to save their restaurant.
I yield to one with first hand knowledge, but from what I’ve read almost anything the bank staff deem as suspicious could lead to a SAR. It’s simpler to report and let the FBI or IRS worry about it, than to risk the bank being fined. However, the result is a flood of reports which most don’t rise to the elvel of attracting an in-depth investigation. After all, their real target is those who accumulate tens of thousands of cash through criminal activity and seek to turn it into lifestyle income.
I do wonder though, if all the reports go into a database which adds to the likelihood of an investigation if there are too many or the same name pops up in some other setting?