Presentation Objectives

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1 8300/OFAC COMPLIANCE Aka: What you don t know can hurt you Presented by: Robert Frimet, CAMS 1 Presentation Objectives Discuss the 8300 requirement for pawn brokers TO INCLUDE: When to fill out an 8300 How to fill out an 8300 When to file Customer notifications OFAC requirements Red Flags/Identity Theft 2 Why file an 8300? Engaging in financial transactions to disguise: Origin True nature Ownership of illicit funds $1 to $2 trillion laundered worldwide annually Terrorists/ tax evaders / criminals use large cash payments to launder money from illegal activities 3 1

2 Who and when to file an 8300: Any person engaged in a trade or business who receives cash in excess of $10,000 in a single transaction or in two or more related transactions or designated transaction must file a form A person includes an individual, company, corporation, partnership, association, trust, or estate. 4 When to file.» A business must file Form 8300 to report cash paid to it if the payment is: 1) Over $10,000, 2) Received as: a) One lump sum of over $10,000,(in business day) or b) A series of payments, (within 24 hours) or with respect to a single transaction or two or more related transactions, that cause the total cash received within a 12-month period of the initial payment to total more than $10,000, or c) Other previously unreported payments that cause the total cash received within a 12-month period to total more than $10,000, 3) Received in the course of trade or business, 4) Received from the same buyer (or agent) and 5) Received in a single transaction or in related transactions. 6) Received as a designated transaction. 7) A CTR SHOULD NOT BE FILED ON PAWN RELATED TRANSACTIONS 5 What Constitutes a Transaction? A transaction occurs when: Goods, services, or real or intangible property are sold. Property is rented. Cash is exchanged for other cash. A contribution is made to a trust or escrow account. A loan is made or repaid. Cash is converted to a negotiable instrument. 6 2

3 What is a Related Transaction? Any transactions between a buyer (or an agent of the buyer) and a seller that occur within a 24- hour period are related transactions. If a business receives over $10,000 in cash during two or more transactions with one buyer in a 24-hour period, the business must treat the transactions as one transaction and report the payments on Form Transactions are related even if they are more than 24 hours apart if the business knows, or has reason to know, that each is one of a series of connected transactions. 7 What is Cash? The coins and currency of the United States (and any other country) 8 A designated reporting transaction is the retail sale of any of the following: 1) A consumer durable, such as an automobile or boat. A consumer durable is property, other than land or buildings, that: a) Is suitable for personal use, b) Can reasonably be expected to last at least one year under ordinary use, c) Has a sales price of more than $10,000, and d) Can be seen or touched (tangible property). 9 3

4 What defines a Designated Reporting Transaction relative to cash?» Cash includes a cashier s check, bank draft, traveler s check, or money order a business receives, if it has a face amount of $10,000 or less and the business receives it in a designated reporting transaction with cash and the total transaction equals greater then $10, When to file? A business must file Form 8300 within 15 days of receiving a payment. The amount the business receives and when the business receives it determines the filing requirement to report cash payments over $10,000 in a single transaction or in related transactions. If the first payment is more than $10,000, a business must file Form 8300 within 15 days. If the first payment is not more than $10,000, a business must add the first and subsequent payments, for a transaction or two or more related transactions, made within a 12-month period. When the amount exceeds $10,000, the business must file a Form 8300 within 15 days of the payment that causes the additional payment to total more than $10, Suspicious Activity A business may voluntarily file Form 8300 if it receives $10,000 or less in a transaction that appears to be suspicious. A transaction is suspicious if it appears that a person is trying to cause the business not to file Form 8300 or is trying to cause the business to file a false or incomplete form or if there is a sign of illegal activity. 12 4

5 Another Important Reminder Federal law requires that company & its directors, officers, employees, and agents who report suspected or known criminal violations or suspicious activity may not notify any person involved in the transaction that the transaction has been reported. 13 Turning a blind eye Example of good pawn broker gone bad Offering discount on the item to evade the filing of an 8300 Giving customer direct knowledge on how to evade the filing requirements 14 Customer Notification The name and address of the seller s business, Name and telephone number of a contact person for the business, The total amount of reportable cash received during the calendar year, When a business files a required Form 8300, the business is required to provide a written statement to each person named on Form 8300 notifying them that the business has filed the form (the business is not required to, and should not, furnish notification to the customer for suspicion transactions voluntarily reported). This statement must include: A statement that the seller is reporting this information to 15 the IRS. 5

6 Customer Notification The buyer must receive the statement no later than January 31st of the year after the year in which the seller received the cash that caused the filing. 16 When Must a 8300 SAR Be Filed? Any transaction or pattern of transactions conducted or attempted that is suspicious. Derived from illegal activity or is intended to hide or disguise funds or assets derived from illegal activity Designed to evade the requirements of the title 26, whether through structuring of other means 17 Who must comply? OFAC All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, and all U.S. incorporated entities. 18 6

7 PENALTIES The fines for violations can be substantial. Depending on the program, criminal penalties can include fines ranging g from $50,000 to $10,000,000 and imprisonment ranging from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $250,000 or twice the amount of each underlying transaction to $1,075,000 for each violation. 19 RED FLAGS PROCEDURE As a company who provides credit and obtains certain information from clients, a Pawn Broker is required to maintain a Program that: Policies and procedures to identify Red Flags Detect fake Identification and identity theft Actions you will take in the event of identity theft A plan to re-evaluate your program as needed 20 The FTC received 51,140 identity theft complaints. California ranked 2 nd in the nation in identity theft complaints of 139 per100,000 people. (Arizona is number 1) The top five fraud complaints for California were: 1 Prizes/Sweepstakes and Lotteries 2 Shop-at-Home/Catalog Sales 3 Internet Services and Computer Complaints 4 Internet Sales 5 Foreign Money Offers 7

8 Presented by: Robert Frimet Certified Anti Money Laundering Specialist Phone: (702)