Collectors at risk for IRS investigations of 'suspicious activity'

Published : 10/12/12
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You might be aware that certain federal regulations apply to transactions involving cash. (Cash includes not only “green” cash, but also certain bearer instruments such as money orders and cashier’s checks.) As a normal part of their business, rare coin and precious metals dealers are required to know about mandatory record keeping and filing certain forms. As we all know, the coin and precious metals community is legitimately a cash-oriented business, and the Internal Revenue Service knows this as well.

What you may not know is that these laws apply to dealers and their collector clients. Sometimes collectors may read something about cash reporting and filing of forms in a financial newsletter, for example. But unfortunately, those articles usually only cover part of the story. They rarely mention how the law may apply to the client.

Very recently several dealers who thought they were on top of things were tripped up by something as simple as filling out bank deposit slips that included cash. Put simply, it is illegal (and a felony) to “structure” your cash transactions specifically to avoid reporting. So when some dealers followed the advice of their local bank tellers who suggested, “If you keep your cash deposits under $10,000, then I won’t have to do this paperwork,” the dealers were subsequently visited by IRS agents who had already seized a very significant amount of money from these dealers’ bank accounts. Under certain seizure/forfeiture laws, the IRS can do this. If the dealers had just made deposits that were what they needed to put in their accounts, there would’ve been no pattern of suspicious behavior for the bank to report. But if a business consistently keeps its cash deposits under $10,000, you can pretty much be sure that the bank will file a suspicious activity report.

Collectors all too often create situations that can land them in trouble. This can include doing something as simple as asking how large a cash transaction they can conduct without having paperwork filed with the IRS. This might be construed as “suspicious” behavior, especially since the filing of a report on legal money should be of no concern to the client. Sometimes a collector will withdraw cash from the bank account on one day, being sure to keep it under $10,000, and then withdraw more cash in a day or so. Banks are required to track “suspicious” behavior such as this, and at some point will report this to the authorities. Usually collectors don’t realize the bank is filing a form of any kind on them because, unlike the coin dealer, who has to ask for the collector’s ID and other information, the bank already has all the client data it needs to file these reports.

While it is a dealer who has to fill out paperwork on certain cash transactions, it is the customer’s name that goes on these reports, as the government is looking for drug dealers and other illegal activity. So while collectors believe that all of this paperwork is really a dealer problem, trying to be “clever” can land the customer in hot water.

These forms — IRS/FinCEN Form 8300 — are simply information returns, not tax returns, and if the cash being used to pay for a transaction is legal, it’s no big deal. The only time it becomes a big deal is when the required paperwork is NOT filed or transactions are structured in such a way as to attempt to avoid reporting.

If you’re a dealer, and you’re not up to speed on all of the cash reporting and anti-money-laundering laws, we urge you to immediately contact a financial adviser who is knowledgeable on the subject. Penalties for willful noncompliance not only can involve very large fines and seizures from your bank account but can also include federal prison time.

If you are a collector paying with cash (or monetary instruments that count as cash), don’t try to be clever and attempt to structure your transaction to avoid filing form 8300 or a bank’s Currency Transaction Report. Ironically, if you’re withdrawing cash from your bank account, the bank may have already reported this to the IRS, and having the dealer file the 8300 Form “completes” the trail of that cash in the IRS computer.

While this commentary is far from an expert treatise on the subject, we wanted to alert the entire coin community to the seriousness of compliance with cash reporting and anti-money-laundering laws, and the fact that an IRS task force is now actively targeting and enforcing these regulations. Again, if your money is legal, there is no problem. Is it illegal money that these laws are designed to ferret out.

The Industry Council for Tangible Assets is the national trade association for the rare coin, currency and precious metals industry. For more information on ICTA, you can contact us at or by phone at 410-626-7005 or 504-392-0023.

Diane Piret has been a professional in the rare coin and precious metals industry for more than 40 years. A member of the Industry Council for Tangible Assets staff for over 20 years, she serves as the organization’s Industry Affairs director.

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