Posted by sirtheta on October 4, 2017
Checking Accounts MO Deposits - Bank Account Shutdowns

Published on October 4th, 2017 | by sirtheta

82

Why Banks Shut Down Accounts Due to Money Order Deposits

This article exists solely to provide information on why money order deposits lead to account shutdowns. This article should not be construed as, nor relied on for, any advice – legal or otherwise.

Bank account shutdowns due to money order deposits are an inevitability if you’re doing high volume, with some banks—such as Chase—being much more aggressive about shutdowns than others. In this article, I’ll explore some of the general and specific reasons that money order deposits lead to bank account shutdowns.

Do note that this article is written from the perspective of someone who is not in, or intimately familiar with the inner workings of, the bank industry.

This topic has been touched on before in our “Ask a Banker” series, here and here.

Background

Bank account shutdowns due to money order (MO) deposits are a result of anti-money laundering (AML) policies and is called de-risking. The creation and implementation of policies to comply with AML regulations is required by the Bank Secrecy Act (BSA). The BSA has been expanded over time, most importantly by the USA PATRIOT Act, which levies greater penalties in an attempt to combat terrorist financing.

Money laundering is conventionally split into 3 phases: placement, layering, and integration. Placement is the initial entry of to-be-laundered money into the financial system while layering is the transfer and conversion of to-be-laundered money through the financial system to make it more difficult to trace. MO deposits typically trigger policies meant to identify the placement and layering phases (moreso the latter).

Digression: Structuring

Though this is tangential to the article, it’s useful to note that the BSA is also why Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs) are required. A CTR must be filled out whenever a customer deposits $10,000 or more in currency; avoiding this requirement by depositing less than $10,000 at a time is strictly illegal and called “structuring”.

A number of sites have made the claim that splitting MO deposits across multiple banks or accounts, often done in order to mitigate the risk of a shutdown, can run afoul of structuring regulations.  A CTR states that “currency” is defined as “coin and paper money of the United States or any other country, which is circulated and customarily used and accepted as money”. MOs are not currency.

SARs are a different ballgame and can be filed regardless of the manner of a transaction.

Level of Risk

Banks tailor their AML policies to their level of risk. Banks in High Intensity Financial Crime Areas (HIFCAs, see FinCEN.gov) must have more robust policies than those in other areas of the country; likewise for banks with a significant base of foreign customers.

Banks also tailor their AML policies to their risk vectors, which depend on the phase(s) of money laundering they are vulnerable to.

Chase Bank…and CitiBank

Conducting a quick review of their locations and foreign assets, we can posit that Chase Bank is quicker than many others at shutting down customers who deposit MOs because they have (comparably) a very high level of risk.

A map of their brick-and-mortar locations (see Wikipedia) shows that many of their 5,269 US branches (by number and by percent) are located in HIFCAs: SoCal, NoCal, Arizona, South Texas, Chicago, New York, and South Florida.

Of the 1,808 banks US-charted banks with more than $300 million in consolidated assets, Chase is by far the biggest, with consolidated assets of $2,082,803,000,000 (trillions). Foreign assets stand at $483,355,000,000 (billions), or 23.21%, of their consolidated assets—the 5th highest percent of the 1,808 banks. Indeed, the next highest percent after Chase is only 7.16%!

The only bank with a worse risk profile is CitiBank, which only has 736 branches (~1/8 as many as Chase) but a far higher percent in HIFCAs (see Wikipedia). CitiBank has the 4th-most consolidated assets at $1,349,581,000,000 (trillions). CitiBank’s foreign assets stand at an astounding $523,413,000,000 (billions), or 38.78%, of their consolidated assets.

Chase Bank and CitiBank have, respectively, 34.79% and 37.68% of foreign assets among the 1,808 qualifying banks. (Total: 72.47%.)

(Data from the Federal Reserve Statistical Release “Large Commercial Banks”.)

(This data is not the only reason Chase Bank is so sensitive to deposits; for example, the regulatory risks –see the fines in the HSBC scandal – are a big driving factor.)

Credit Unions

We can also posit that credit unions are generally less likely to shut down accounts for MO deposits because they are smaller and deal less with foreign assets. Additionally, since many credit unions deal locally (instead of nationally), those located outside of HIFCAs generally don’t have branches in HIFCAs that would require tougher AML policies.

In other cases, credit unions are simply unacceptably lax. (North Dade Community Development Federal Credit Union is a rather infamous example – they were eventually liquidated by the NCUA for their willful violations of AML laws.)

AML Triggers

MO deposits can trigger various “red flags” depending on the level of activity. Sudden MO deposits inconsistent with past activity? Large value and/or volumes of MO deposits? Deposits of sequentially numbered MOs? All can (and eventually will) trigger a red flag.

A specific policy that it’s easy to trigger of is a bank’s velocity rules, which are implemented at nearly all banks. Though the specific implementation varies by bank, they look at how fast money enters and leaves accounts. Large MO deposits used to quickly pay off a credit card can thus trigger a review due to a velocity rule, especially when out of character for previous account activity.

Conclusion

Due to their nature, AML policies are proprietary and kept undisclosed. The policies discussed here are thus only a rough sketch of why MO deposits might trigger AML policies and lead to account shutdowns.

If you care about your relationship with a bank, consider directing your MO deposits elsewhere.



82
Leave a Reply

avatar
 

  Subscribe  
newest oldest most voted
Notify of
Matthew

Excellent post with great information!

Jp
Jp

Would mixing in regular spend be considered structuring? I’m not trying to avoid a review just trying to avoid a shutdown

Max
Max

Structuring only applies to the deposits of currency, which as this post states, are paper notes and coins (of any country). Cheques and money orders are not currency.

Brandon
Brandon

That’s not true at all.

Mser
Mser

That’s not how many banks interpret the rule.

Ken
Ken

But you can easily use the illegal cash to buy MOs and then deposit those.

Nick
Nick

Makes me nervous with what I’m doing. I am receiving three rebate cards (totaling about $900), each of which has PIN debit access but can’t be used to withdraw cash or deposit into a bank account via cash advance. I have converted two so far to MOs, which I subsequently deposited with TD Bank and then transferred a few days later to my main bank account elsewhere. I have one more to go, which is more than either of the prior two cards. I’m wondering now if I should just mail this third one in directly to my online bank rather than risk closure.

TomTX
TomTX

Three MO and under $1k? Tiny.

There are people doing tens of thousands per month.

Mser
Mser

There are those doing hundreds of thousands a month…

My advice. Always deposit >$10K at a time. Wells is fine with volume – just don’t go from 0 to 60 overnight

Joseph
Joseph

People don’t usually get shutdown for $900. It’s when you are putting in $10,000 within a close period of time. For instance if you put in 10k worth of 1k MO’s in a two week period, it might warrant a SAR being filed about your account. If you spread that out with three bank accounts two of them being credit unions, you should be better off. You add a serve card in the mix and pace yourself, think long term. We here deal with clean money, we just happen to move around a lot of it. I think we all did close to 10k in a couple weeks or over when five backs came out last year.

Mser
Mser

Horrible advice.

Stacking Points

How so?

Franklin
Franklin

You should be nervous. While what you are doing is not fraudulent, it resembles very closely fraudulent behavior. While I’m sure no one is closely monitoring your Account. If your account outsorted for review of any risk mitigation type and activity like that was noticed I’d say you’d have some high potential for a few things to happen.
– Account frozen indefinitely while reviewed.
-funds could be frozen as well, because they could be believed to be fraudulent.
-nothing may happen at first but a SAR may be created unbeknownst to you and then one day your account could be closed without any prior warning and most likely only a vague reason of why it was closed.
Hopefully you’d receive a check for your remaining funds.

Franklin Hammershcmitt, esquire

El Ingeniero
El Ingeniero

Troll alert: depositing 3 money orders has practically zero potential for shutting down an account.

NinjaX
NinjaX

ur vol is low but ur actions look suspicious and is n00b. u depo MO in TD? ur joking dude. go read up more.

DD
DD

Good heads-up Doc.
An example: When I am between apartments and seeking a new one, I have to buy money orders. Managers require it for “background checks” (supposedly; some want to steal free money from would-be renters)
Affordable rents are now so slim in SoCAL that you buy the MO even before seeing the area or apartment, to expedite the application. So I’ve been in a position of having quite a few MOs of various denominations in my wallet. And it is definitely looked upon with suspicion by Chase. MOs used to be as good as cash. Criminals changed that.

jean
jean

Thanks for the great info. Are there some data points what amount (monthly/annually) are considered “generally” safe? (not risk-free, and other than the two banks you mentioned)?

William Charles

There are, but they aren’t usually publicly shared. I think lots will exist on most private forums.

bob
bob

Not really, two different people at the same FI might have different risk profiles.

Mimi
Mimi

IME, if you MS and plan to deposit a lot of MOs, local CUs and small banks with limited branches in your area are the best to set up an account. When I opened my account with them I already asked how they treat MO deposits which will be the bulk of my check deposits. Their response gives me an idea what to expect; if the Risk management dept. of the FI flags your account, you will get a call from them asking about your MO deposits. If you are able to give answers that satisfy them, you can continue with what you’re doing. But if they do not like your answers (they may ask various questions so best to be prepared for answers), you can expect a shutdown in the next few days or weeks. This has no bearing on your relationship with the tellers of branch manager because they cannot override decisions of the risk management dept even if you have cordial relations with the FI personnel.

Tyler
Tyler

Thanks for the detailed write up.
Just as a data point I regularly deposit a few MO’s into my personal checking accounts. Usually the MO’s are anywhere from $500 to $1,000 and the deposits are usually from $1,500 to $4,000. I usually deposit in WF and Cap1. I’ve gradually got to these amounts so I’m not sure how risky this is.
Anyone have any specific data points on shutdowns from any of their banks?

Justin
Justin

Would like to know about WF as well.

Tyler
Tyler

I haven’t had any issues with either bank so far.

Brandon
Brandon

I’ve been doing $5k a month for the last six months with no other activity besides credit card payments and $.50 debit transactions to avoid monthly fee. All money order deposits through mobile app.

Chris
Chris

Wait, what bank allows MO deposits with mobile app?

Tyler
Tyler

I think most do. I just find it not worth the risk to do it.
I’ve done it with Citi and Chase.

Justin
Justin

Is there risk to using MOs to pay off credit cards?

Mimi
Mimi

It depends what CCs you’re paying. Chase is one those “allergic” to paying CC bills inside the branch with MOs. I’ve also read they flag regular mailing of MOs to pay CC bills so it’s safe to assume they frown on it. I have no personal experience paying CCs with MO whether in-branch or sending via postpaid bank envelopes.

Reubenfairibrd
Reubenfairibrd

I have been paying business and personal cc at the branches with MOs for over a year. Never have a problem. Before I started, I secure message Chase and ask them how I can make payments. They instructed me to pay by mail, online, or in the branch with MO or check. I was looking for that message to post here but I believe it was deleted. What they don’t like is CASH.

Justin
Justin

Great article Sirtheta!

scott
scott

Concur – in part, and nicely written. Yet would be greater still if it wasn’t quite so vague on the key matter of interest to many, if not most readers here — namely, at what level does utilization of m/o’s — as deposits and/or payments (say to B/A cc’s) — “trigger” or increase one’s vulnerability to being “shut down?” Positing that “it depends” on past patterns — w/o indicating what the base might be — is but mildly (not quite) reassuring. 😉

Leo
Leo

That is the completely YMMV part of the hobby.

Tyler
Tyler

It’s very much a YMMV just as many other parts of the Hobby. Different stores within the same chain in the same city sell VGC’s while others don’t.
I’m sure it’s the same with bank account shutdowns. So any data points that anyone knows of would be a nice help for the community.

William Charles

It’s vague intentionally, whenever we share specific datapoints regarding MS people get angry. That stuff is usually reserved for private forums/groups thes days.

The Value Traveler

Are there DP’s of customer who got shut down by Chase having their accounts reinstated by sending letters to them ?

Ashok
Ashok

Bank account or credit cards ?

Mser
Mser

If you’re closed, you’re dead to them for many years.

JASON
JASON

Where is the Queens of MS story? Chase shut her down for depositing 50K cash every month, if my memory serves me right.

artgriego
artgriego

What makes a HIFCA? Big city?

Bill M
Bill M

Not just big cities. In fact, all of Arizona is considered a HIFCA.
https://www.fincen.gov/hifca

James
James

The author clearly doesn’t know BSA or AML. I stopped reading about the first few paragraphs.

Leo
Leo

Enlighten us mr all-knowing. Hahaha.

William Charles

Hi James, if you’re making an assertion such as this it’s helpful to point how the information is wrong and back it up with sources.

bob
bob

The author does state they aren’t an insider. And yes, they really don’t know much about BSA/AML.

They get some credit for trying to shed some light on an important aspect of MS. And for mentioning SARs, something I rarely ever see mentioned.

William Charles

As always, we love readers that are insiders and know more information than us. The only way we can learn is by readers providing their own insights and also giving us links on where to read up about stuff. If you know more then please share it so we can all learn.

bob
bob

This is technically all anyone needs to know.

https://www.ffiec.gov/bsa_aml_infobase/pages_manual/manual_online.htm

Insiders can’t really share too much information on this subject. Explaining how to avoid issues when MSing is the same as how to avoid issues when doing anything illegal. And the measures in place at FIs don’t analyse transactions based on the professed intent of the customer.

The only advice I would freely give is to develop a strong relationship with a small FI. Be honest and hope for the best.

James
James

The author is mistaken on many points regarding AML and BSA. @DoC: please vet your writers.

Dcatast
Dcatast

Operation choke point.

I’m hoping this program is now ended and banks no longer are looking to enforce this over reach.

bob
bob

lol, these regulations haves been around long before Choke Point was even a thought

CM

Wow, great write-up! Amazing that I’ve read so many threads around MS, yet have never seen HIFCA mentioned anywhere (but, then again, perhaps I weren’t looking hard enough, as these things slip through unless you know what you’re looking at).

I think it might also help the readers if you include the map and/or the screenshot of the list of countries in the affected states, for the complete picture.

It’s interesting, however, that in NorCar, Santa Cruz county is included, yet Santa Clara is not — it seems that the list is rather arbitrary, and simply includes all coastal counties in Northern California, plus some adjacent areas like CCC (perhaps due to the presence of ports?) — I can’t imagine that there is that much financial crime in the tiny county of Santa Cruz.

Back to Top ↑