Eva Rosenberg, the Internet's Tax Mama, hosted an online seminar last week covering what small businesses need to know about the Bank Secrecy Act. Ulla Scott, an agent assigned to the anti-money-laundering unit of the IRS, presented excellent tips for small business owners. Here's my summary of the presentation, with plenty of links for you to do your own research.

The Treasury Department and the Internal Revenue Service are responsible for detecting and preventing money laundering schemes. Both the Bank Secrecy Act of 1970 (codified in 31 USC 5311-5332 and 31 CFR 103) and the USA PATRIOT Act of 2001 (Public Law 107-56) require banks, money service businesses, and retail stores to report on financial transactions that have the potential for laundering money.

How is this related to taxes and the IRS? Certain businesses must file reports with the Treasury and IRS to document cash transactions, to report suspicious activities, and to keep detailed records for audit purposes. The IRS has authority to impose significant penalties for failing to comply with these requirements. As a result, many tax professionals are helping their small business clients stay compliant with these reporting requirements.

Reports Required under the Bank Secrecy Act

Currency Transaction Reports: Businesses that receive more than $10,000 in cash or cash equivalents in a single transaction or series of related transactions must file IRS Form 8300 within 15 days of receipt of the cash. The minimum penalty for intentionally failing to file Form 8300 is $25,000. For more information, see the following IRS Web pages:

• Reporting Cash Payments of Over $10,000
• FAQs regarding Reporting Cash Payments of Over $10,000 (Form 8300)
• IRS Form 8300 (PDF file)

Suspicious Activities Reports: Money Service Businesses are required to file a Suspicious Activity Report (TD Form 90-22.56) if the business receives funds from a customer, and the business knows or suspects that the funds have an illegal source, are structured to evade the Bank Secrecy Act requirements, or appears to serve no known business purpose. Businesses must file a Suspicious Activities Report within 30 days of the transaction. According to the IRS, the penalty for failing to file a report "is not to exceed the greater of the amount involved in the transaction (not to exceed $100,000), or $25,000. Any person who willfully violates the reporting requirements may be subject to criminal penalties, including a fine as great as $250,000 or five years imprisonment." For more information, see the following IRS Web pages:

• Suspicious Activity Reports
• FAQs Regarding Suspicious Activity Reports
• Treasury Department Form 90-22.56 (PDF file)

Businesses Required to be Registered as "Money Service Businesses"

A business must register as a money service business if the business issues, sells, or redeems money order or traveler's checks, if it provides check cashing services, is a currency dealer or foreign exchange dealer, or provides money transfer services. To register as a money service business, fill out FinCen Form 107, and submit it to the IRS Service Center in Detroit, Michigan. Money Service Businesses must register with the IRS within 180 days of after the business begins providing money services, and renew their registration every two years. There is a $5,000 penalty per day for failing to register as a money service business. For more information, see the following IRS Web pages:

• Money Services Business Registration Requirements
• FinCen Form 107 (PDF file)

Anti-Money Laundering Compliance

Money service businesses are required to have written anti-money laundering compliance policies, designate a person responsible for day-to-day compliance with the Bank Secrecy Act (the compliance officer), and provide an independent audit of their anti-money laundering policies (the auditor must be different than the compliance officer). The IRS may audit a money service business to determine if the business is maintain compliance with the Bank Secrecy Act. For more information, see the following IRS Web pages:

• Have You Implemented Your Anti-Money Laundering Compliance Program?
• FAQs Regarding Anti-Money Laundering Compliance Programs

Other Bank Secrecy Act Requirements

Individual taxpayers must file Treasury Form 90-22.1 to report foreign bank accounts that they own or have control over. The form is required if you have a total of $10,000 or more across all your foreign bank accounts. The form is due on June 30th of each year. For more information see my articles on:

• Report of Foreign Bank Accounts
• Laws, Requirements, and Penalties for TD Form 90-22.1

Ulla Scott's Web Seminar

Ulla Scott, a Senior Bank Secrecy Act Specialist with the Internal Revenue Service, presented this information and answered questions from tax professionals. The seminar was held on Eva Rosenberg's Tax Mama Web site. Log in to the "Member Area" of the site, then navigate to the Download Area, and find the Money Laundering PDF file.

Anti-Money Laundering Information from the Federal Government

• The Financial Crimes Enforcement Network (FinCen) provides news, information, and guidance on Bank Secrecy Act matters.
• MSB.gov provides forms, publications, and information for money service businesses.
• Bank Secrecy Act Education and Outreach Team helps tax professionals and money service businesses through training and education.