Here's What Happens if You Wire Someone a Lot of Money

When you wire money from your savings or checking account, it is transmitted electronically, and no physical money is exchanged. The transfer may be facilitated by a bank or nonbank money transfer provider. Most people transfer money when they need funds processed quickly or when moving a large amount of money.

Large wire transfers do not go unnoticed, whether it's to buy property, pay tuition, make an investment, or support a family member. Under the Bank Secrecy Act (BSA) of 1970, certain transactions must be reported to the Internal Revenue Service (IRS). Here, we take a closer look at how it works.

Currency and Foreign Transactions Reporting Act

Because of the Bank Secrecy Act, all banks and other financial institutions must file a Currency Transaction Report (CTR) for any wire transfer over $10,000. The CTR includes the following information:

• The name and account number of the person or party initiating the transfer.
• The name of the person or party receiving the transfer, their account number, and the amount transferred.
• The nature of the transaction. For example, if the money is being transferred to close on a house, that will be noted.

Penalties for failure to report

If a money transfer provider fails to report a wire transfer over $10,000, they can expect to be penalized. A single violation ranges from $25,000 to $100,000, depending on the severity of the offense. An individual who is found responsible for failure to report wire transfers over $10,000 can face their own penalties. These include:

• A civil penalty of up to $25,000
• A criminal penalty of up to five years in prison and a fine of up to $250,000

Exceptions to the $10,000 reporting requirement

There are some exceptions to the reporting requirement, including:

• Transactions conducted by financial institutions on behalf of the U.S. government
• Transactions conducted between financial institutions
• Transactions conducted with exempt organizations, such as charities and political campaigns.

Protecting your interests

Here are four other things you should know about wire transfers:

1. It's up to you as the consumer to work only with credible financial institutions. Once a wire transfer is made, it is final and cannot be canceled. There is also no way to get your money back if you are scammed.
2. You have rights as a consumer. For example, before wiring money, the financial institution must reveal the cost of its services, including fees, taxes, and exchange rates if you're transferring money internationally.
3. Some financial institutions have a daily transaction limit, while others do not. Find out in advance what those limits are.
4. Domestic transfers are generally completed on the same day, while international transfers are typically processed within a few days, depending on the country.

The goal

The goal is to prevent money laundering, terrorist activity, and other criminal pursuits. The IRS is focused on finding patterns that may indicate illegal activity, and as long as everything you're doing is above board, there's no reason to fear that your transaction will be flagged.

While the ability to wire money from one place to another within seconds is impressive, it also presents criminal opportunities. The Currency and Foreign Transactions Reporting Act exists solely to protect everyday citizens from those who would cause them harm.