IBA Compliance Connection

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One of our business customers has an outside vendor process its payroll for all employees but one. For that employee, the business owner writes paychecks drawn on his personal account, which suggests that the business is circumventing immigration requirements for that employee. Does this suspicion require us to file a SAR, even though the company simply is circumventing IRS requirements?

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Yes, we believe a SAR is required due to your suspicion that the customer is employing an unauthorized alien. SARs are required whenever a bank suspects criminal activity involving or aggregating more than $5,000 in transactions conducted at or through the bank. The employment of an individual who is not authorized to work in the U.S. is a federal crime necessitating a SAR filing. In addition, most forms of tax evasion also are federal crimes, which would necessitate a SAR filing if the evaded taxes cumulatively exceed $5,000.

If you continue to suspect that your customer is employing an unauthorized alien or is evading taxes, you also should file continuing SARs every 120 days after filing the first SAR.

For resources related to our guidance, please see:

  • 12 CFR 208.62(c)(2) (“A member bank shall file a SAR . . . whenever the member bank detects any known or suspected Federal criminal violation, or pattern of criminal violations, committed or attempted against the bank or involving a transaction or transactions conducted through the bank and involving or aggregating $5,000 . . . .”)
  • Immigration and Nationality Act, 8 USC 1324a(a)(1) (“It is unlawful for a person or other entity — (A) to hire . . . for employment in the United States an alien knowing the alien is an unauthorized alien . . . .”)
  • Immigration and Nationality Act, 8 USC 1324a(f)(1) (“Criminal penalty. Any person or entity which engages in a pattern or practice of violations of subsection (a)(1)(A) or (a)(2) shall be fined not more than $3,000 for each unauthorized alien with respect to whom such a violation occurs, imprisoned for not more than six months for the entire pattern or practice, or both, notwithstanding the provisions of any other Federal law relating to fine levels.”)
  • Internal Revenue Code, 26 USC 7201 (“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”)
  • FinCEN SAR Activity Review, Issue 12 (October 2007) (“Several Other types of suspicious activity are regularly indicated and are of enormous value to specific law enforcement agencies, such as: Tax Evasion . . . and Employing Illegal Aliens.”)
  • FinCEN SAR Activity Review, Issue 21 (May 2012) (“Financial institutions with SAR requirements may file SARs for continuing activity . . . with the filing deadline being 120 days after the date of the previously related SAR filing.”)