Obligations Under the Bank Secrecy Act

Reporting Obligations Under the Bank Secrecy Act

Instructions/Descriptions

Reporting Obligations Under the Bank Secrecy Act

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Question Description

Consider the following fact pattern and analyze and answer the following questions: (1) does Red Skellington have any reporting obligations under the Bank Secrecy Act due to the conduct described? If so, which forms must he file? (2) Assuming that he fails ever to file any forms, what are the maximum penalties he faces?

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It’s July 4th, and U.S. Citizen Red Skellington has won big at the Casino in Vegas! On a $100 dollar bet he has won $100,000. Recognizing his good fortune, he instantly cashes out, taking with him 1,000 crisp new $100 bills, and goes to leave.

On his way out the door, Shady Sam intercepts him. Sam says, “Red, you don’t want to pay any taxes on that do you?” Of course Red doesn’t. So, Sam suggests Red follow him to St. Kitts (a Caribbean country outside of the United States) to store his money there.  That way, Sam says, “the IRS will never know!” Red agrees, and they go together, arm in arm and cash in hand, to the airport. There, they board a plane to St. Kitts.

In St. Kitts, Sam introduces Red to a St. Kitts lawyer who sets up for Red a company incorporated under the laws of Panama called Winner Corp, of which Red is the sole owner. The lawyer then sets up a St. Kitts bank account in Winner Corp’s name. Red deposits the $100,000  worth of cash into the St. Kitt’s bank account. The whole process only takes a couple days, and Red returns home to California a happy man.

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Two weeks later, however, Red has second thoughts and has all  $100,000 wired back to a bank account in the United States.

Reporting Obligations Under the Bank Secrecy Act

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