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.
    sirtheta
  • On October 4, 2017, 12:00

View Comments (92)

  • Had three credit card accounts closed by CITI; was making MO payments and they specifically said it was because of the MO payments.

  • I deposited $3500 (7 $500 )money order into my Capital one Account... the money is available but the bank has frozen my account and is asking me to provide the receipt of the money orders however I don’t have them anymore because i shredded them once I deposited the Money orders... now they are saying that my account is been investigated and they are not giving me any information... by the way I deposited this money order 2 weeks ago and my account been on holt since pending an investigation

  • Ive been depositing MO to Wells Fargo in the past 3 months. I dont think they care at all... i did around $3600 a week.

  • I also use MO to pay off credit cards.
    Recently, I paid $7,000 (7 $1k money orders) to pay credit card. It was the most I did at one time.
    So far, haven't heard from bank.

    • u should stop that. im gonna assume its Citi or BofA. anyone else u will get shut down. those 2 take some time, a few months to a year and u will get shut down too.

      • Yes. Depositing MO's is bad news! My bank teller gave me a hard time and I got SOOOO angry and threw a fit. I demanded her accept the MOs and she said no its money laundering and I had to remind her that marijuana is legal now and I do my laundry at the dry cleaners. Very strange interaction. Walmart wasnt helpful either.! Any suggestions?

        • Marijuana is still federally illegal, and I don't know why you even brought that up to a bank teller. And getting soooo angry, throwing a fit, and demanding them to accept your MO is just plain stupid and childish. In this game you need to be patient and willing to just move on to the next bank/source/MO place. But throwing temper tantrums solves nothing.

          And how is WM relevant to your bank interaction?

  • What's your opinion on USAA? When I called to inquire about some of their products, the rep tried to sell me their checking product by telling that even though they're 100% virtual, they're nothing less than any of the major commercial banks. One example he gave was: "so you might have some cash that you want to deposit and you wonder how you can do that with a bank that doesn't have its own ATM. What I do is I go to a grocery store and turn the cash in to MO, so that I can use mobile deposit." I've been depositing MOs mainly at USAA since then.

    Thoughts?

  • I have been into MS for years now. And, I can do a ton of Money Order deposits. My "regular" bank, BB&T, where I get my pension check and SS check deposited, red flagged me for the volume of money orders I was depositing, at various branches and then paying off credit cards almost at once. I received a call from a Bank Manager, who knew me from my years of doing business there.

    She asked what I was doing and knew everything from my file. I was honest and told her and told her that it was for the purpose of obtaining credit card bonuses and points.

    She suggested I stop. I complied. That was over a year ago and I have had no issue with BB&T since.

    I already had a 2nd bank, Wells Fargo and then I opened a 3rd, Bank of America and have had no issue with them at all. I have a Credit Union as well, but I use them rarely.

    I do not believe that the person who deposits money orders from time to time will have any issue at all. But, people like me need to be careful and spread it out.

    • i am very shocked u use BofA to depo MO. many shut down stories. whats your vol? i typically hear red flag zone at 20k/mo. what do you consider safe with BofA? i personally stay away from them like chase and citi.

      • I have been doing BOA for a couple of years. I keep around $3000 balance at all times in my checking account with them and have no automatic deposits. I have a ton of credit cards with them, especially numerous Alaska credit cards for me and the wife. I will do $8,000 to $14,000 per month in MO's with them most months. Have not had an issue with them at all. Lucky I guess if you have had bad experiences. I am trying to do more organic spending, especially on Am Ex cards as I don't want all of those accounts closed. This hobby is a challenge.

        • appreciate the DP, but also a very interesting one. cant believe youre doing OK with BofA. keep doing whatever youre doing.

          i have stayed away from BofA, but here is a DP about a recent BofA shutdown: https://www.flyertalk.com/forum/28723216-post368.html

          your DP may mean they do not have robust algos yet to detect MO depo activity which is good, but be careful out there man.

          with the current landscape, u want organic spend on USB, Amex, citi, chase, cap1, bofa, discover in that order. thats how i roughly rank them from MS tolerance level, but u can assess urself.

    • IME, yes.

      I've deposited up to $15K MOs in one transaction to our business account for a long time now without AA from the FI. It was the bank manager who told me to set it up since she noticed my high dollar deposits to the account. There is at least $5K parked to the account that the bank can use so I'm free to use my MO deposits to pay bills. My transactions are all legal, been with this bank for 10 years now. We have past history of withdrawing large amounts when we go to the car dealership or coin shows so the BM is used to our "normal activities".

    • Having money on deposit $10K, $20K or more and doing MOs makes more of a difference than the type of account.

      Depositing MOs and withdrawing them like the Pony Express and no real money on deposit is the problem from the Banks perspective.

  • There are definitely more aspects of BSA compliance that banks and credit unions face than are discussed in the article above. For instance, the BSA and its implementing regulations impose an obligation on financial institutions to report transactions that involve or aggregate to at least $5,000, that are conducted by, at, or through the institution, and that the institution "knows, suspects, or has reason to suspect" are suspicious. 31 U.S.C. 5318(g) and 31 C.F.R. 1020.320.

    A transaction is "suspicious" if the transaction:
    (1) involves funds derived from illegal activities or is intended or conducted to hide or disguise funds or assets derived from illegal activities;
    (2) is designed to evade any requirement in the BSA or regulations implementing the BSA; or
    (3) has no business or apparent lawful purpose or is not the sort in which the customer would normally be expected to engage, and the bank knows of no reasonable and possible explanation for the transaction after examining the available facts, including background and possible purpose of the transaction. 31 C.F.R. 1020.320(a)(2)(i)-(iii)

    In my opinion, these regulations place a great burden on financial institutions to make judgement calls on what is or is not "suspicious" in the eyes of BSA and, thus, their regulators. So much so, that many would rather not serve customers that exhibit certain behaviors.

    • Oh yes, I will add a note about this, but this article is not meant to be necessarily comprehensive (apologies for not including that). Rather, it's meant to be sort of a peek into what gets you in trouble when you deposit MOs. (In part because I don't work in finance and can't be comprehensive!) This is good information to add, though :)

    • Unless of course, it involves billions of dollars and lots of profits. Then banks seem surprisingly willing to have a generous view of their customer's activities...

    • Of all the comments, you are the only one discussing the burden of regulatory compliance on the banks.

      I know what you do for a living. :)

  • great write up, appreciate all the feedback and tips, i only deposited 2 MOs total less 1500 at suntrust for my new acct, not only they mail me notice of hold for 15 days, also shut down my acct after 10 days before the 15 days expires, nevertheless, i filed CPFB about suntrsut's practices. just a DP for you all. YMMV.

  • 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.

Leave a Comment