Banks are financial institutions licensed to receive deposits and make loans. They also provide financial services like wealth management, currency exchange, etc. Since time immemorial, man has trusted banks with their money. On the other hand, the banks repay the trust by keeping their money safe and making it available when needed. However, sometimes, your bank may want to find out certain information when withdrawing a certain amount of money. But why do banks do that? Why do they want to know the reason for a withdrawal?
Banks ask questions regarding a withdrawal for several good reasons. Most times, it’s because you are withdrawing $10,000 or more, an amount that they are required to report to the IRS. Other times, it could be because of security reasons or probably due to lack of funds.
If your bank has asked the reason for a withdrawal, you may feel that they are nosey. However, once you know the truth behind why they ask, you may want to thank that bank teller or probably cuss them, depending on how you see the reasons. Banks usually ask questions regarding a withdrawal (especially a big one) for several reasons. Of course, the reasons may vary depending on your bank. And as you suspected, you aren’t required to answer them. In this article, we will look at the various reasons why banks tend to poke their noses in your affair.
Why Do Banks Ask Why You Are Withdrawing Money?
Of all the questions banks direct at its customers, asking for the reason behind a withdrawal seems to be the least accepted and probably the most criticized. Like you, I was shocked when I was asked the purpose of a withdrawal after withdrawing some money for a big purchase. It was my first time, so I didn’t really know why such questions were being asked. I had to ensure I was actually at my bank before I thought of answering the question because it all seems weird. In the end, I discovered that they needed the detail to fill in IRS Form 8300.
For you, the reason may be different. You may also not be privileged to know why your bank asked the question. However, I can assure you that it is for your good. In addition, you should note that failing to answer the question could come with some consequences. So, provided the teller doesn’t request your card password or any sensitive information, it is best you provide them with the necessary answers. If you suspect foul play, you aren’t comfortable with the question, or you need more clarification, you can ask a superior in the bank.
Bank Secrecy Act:
The FDIC created the Currency and Foreign Transaction Act in 1970 so United States financial institutions could assist the government in fighting money laundering. Also known as the Bank Secrecy Act, these regulations demand that financial institutions report any customer activity that seems suspicious or different from normal behavior.
For example, your bank creates a report to the Internal Revenue Service if you withdraw over $10,000, especially if you are yet to withdraw such a huge amount of money in the past. This law also covers the purchase of traveler’s checks, exchanging one currency for another, including large cash deposits.
Reasons Why Banks Might Ask Why You Are Withdrawing Money:
It is common practice for banks to ask for the purpose for withdrawing a certain amount of money.
They usually do this for several reasons, they include:
- Due to insufficient money in the branch required to carry out the transaction. In the end, they may offer a Banker’s draft instead.
- Concern for your security. If you withdraw a huge amount of money, a bank will want to ensure that you aren’t being scammed. In addition, if you are an older person, a bank will want to ensure that you aren’t being subjected to blackmail or threat.
- To fill out IRS form 8300.
One of the main reasons why banks often ask questions regarding the purpose of a certain withdrawal is due to the Bank’s Secrecy Act. If you withdraw over $10,000 from your bank, you may have to answer questions regarding your withdrawal, such as what you plan to do with it.
The teller is required by law to ask these questions to complete IRS Form 8300. If you refuse to provide the necessary answers or give a wrong answer, the teller may decide to file a suspicious activity report and refuse your withdrawal request.
Take Adequate Safety Precautions:
Practice safety when carrying a huge amount of money. Bigger notes make a smaller pile of cash. For example, $10,000 can fit into your purse or bag in $100 bills.
Separate it from the money you’ll need for regular transactions like payment of bus fare, train ticket, cab fare, etc., so you don’t pull it out in public. Put the wallet out of easy reach for marauding pickpockets, like in your inner coat pocket, and if you do carry it in a purse, secure it and hold it firmly.
When you leave the bank, look confident and don’t hold the area where you have kept the money. Because there is safety in numbers, have someone you trust with you.
If you need to withdraw a huge amount of money from the bank, say $60k, you can consider asking for a cashier’s check instead of cash. You would have trouble hiding such a large amount of money in a purse or laptop case.
Can a Bank Refuse to Let You Withdraw Money?
Banks help keep our money safe, and in time of need, they often provide us with means to withdraw or transfer the money. However, it is alleged that your bank can refuse you access to your hard-earned money. How true is this? Can a bank really stop you from withdrawing money you made legally?
A bank may refuse you access to your money if you fail to provide them with answers regarding the purpose of a significant withdrawal. They won’t only deny you access to the money. They will as well report you to the necessary authorities.
Worthy of note that the intent of these rules involves stopping money laundering, including other illegal activities. They aren’t designed to keep you away from your hard-earned money. If you want to withdraw a huge amount of money, bring your identification with you and openly explain the reason for your withdrawal.
