MY PRACTICES
BANK INQUIRIES
LARGE PAYMENTS
CORRECTIVE DISCLOSURE
SANCTIONS EXPOSURE
U.S. BANKING RISKS: BANK INQUIRIES, LARGE PAYMENTS, SANCTIONS AND CORRECTIVE DISCLOSURE
Legal counsel for business owners, investors and families with international income, accounts and assets.
A message arrives through the bank's portal, or a relationship manager calls. The bank wants to know where the money came from, what your business actually does, who owns your company, or why a transfer arrived from another country. There is a deadline, usually a short one, and almost no explanation.
Most clients treat this as an administrative nuisance. They answer quickly, attach whatever documents are closest to hand, and move on. That is often the moment a manageable situation becomes a difficult one. A bank review may be the first time anyone has looked at your cross-border financial history as a whole: tax returns from different countries, foreign bank statements, immigration filings, and the answers you gave the bank when you opened the account. These records often describe the same activity in different ways. Some differences are easy to explain. Gross receipts are not profit, and a new company may continue an older business. Others reveal a reporting gap or a sanctions question that needs separate legal work.
Every engagement therefore has two tasks. The first is to answer the bank accurately, completely and on time. The second is to determine whether your records reveal a separate problem, and to address it before someone else identifies it. A bank extension gives you time for the first task only. It does not pause any IRS, FinCEN or OFAC deadline, and it does not preserve access to a voluntary disclosure procedure.
Kutuzov & Associates, P.C. handles banking, tax and sanctions questions together, so that a response prepared for one purpose accounts for its consequences in the others.
WHY U.S. BANKS ASK QUESTIONS
U.S. banks operate under the Bank Secrecy Act and FinCEN's customer due diligence rules. These rules require a bank to understand the nature and purpose of each relationship, build a customer risk profile, and monitor activity against that profile. Automated monitoring and sanctions screening generate alerts. An analyst reviews each alert and may ask the relationship manager to obtain more information from you. The person who contacts you often does not know what triggered the request and may not be permitted to say.
A routine periodic review and an escalated event-driven review can arrive in identical language. Two points follow.
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The fact that a bank processed similar transfers for years does not mean it approved them. A payment that reached your account still requires its own legal assessment.
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A question asked today does not mean the bank has reached any conclusion.
The standard for a suspicious activity report is suspicion, not proof. A documented explanation gives the bank something to weigh. Silence, or an answer that conflicts with what the bank observes, leaves it with activity it cannot explain.
BANK INQUIRIES AND SUBSTANTIATION OF PAYMENTS: SOURCE OF WEALTH AND SOURCE OF FUNDS
Nearly every bank request, however it is worded, asks one or more of five questions:
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What is the account for?
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How did you come to have these assets over time? (source of wealth)
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Where did this particular payment come from? (source of funds)
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Whose money is it, and who controls it?
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Were the underlying activities and filings lawful and properly reported?
Each question requires different evidence. A document that answers one may say nothing about the others.
The common failures are predictable:
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A client relies on a single tax return that covers one year and shows gross receipts rather than profit.
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A client presents a U.S. company formed last year to explain wealth accumulated over a decade abroad.
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A client ticked a net-worth range at account opening, forgot it, and is now asked to explain wealth the bank's own file attributes to them.
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An online business with thousands of small customers can document itself only with records that look wholesale: one annual tax figure and a few large transfers from an intermediate account abroad.
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An explanation changes after the bank pushes back, and the bank reads the new version with skepticism, even when the correction is honest.
How we handle it. We start by retrieving everything the bank already holds, including onboarding questionnaires, earlier answers and documents uploaded by you or your accountant, because the bank will read each new document against that file. We identify which of the five questions the bank is actually asking.
We then prepare two separate pieces of evidence:
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a source-of-wealth reconstruction showing how your assets built up over time;
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a transaction-level source-of-funds trace running from origin to account through platforms, processors, settlements, currency conversions and intermediate accounts, with control totals and every assumption stated.
Where foreign records are involved, we arrange translation and, if needed, verification by foreign professionals. A foreign tax return shows what was declared; it does not by itself show where the money in your account came from.
We draft the cover letter, negotiate extensions and partial production where needed, and correct earlier inaccurate answers directly and with documentary support. Before anything is produced, we check what the documents will show, including the institutions and counterparties they name. The purpose is not concealment. It is to make sure the decision about what to produce is an informed one.
What you receive: an attorney-prepared response to the bank, supported by the source-of-wealth reconstruction, the source-of-funds trace and an organized evidence file, with handling of follow-up questions until the review closes.
LARGE PAYMENTS PLANNING AND PRE-TRANSFER DUE DILIGENCE
The following transactions are exactly the kind that produce alerts, holds and returned wires:
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proceeds from the sale of a business or property;
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an inheritance;
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an investment exit;
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years of savings moved to the United States.
The risk rises when the money travels through a third country, arrives from someone other than the owner, passes through a payment processor, or does not match the profile recorded when the account was opened. None of these features is unlawful. Each means the bank may need records from outside the bank to understand what it is seeing.
These problems are far cheaper to solve before the money moves than after.
How we handle it. Before the transfer, we:
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map the proposed route and every institution in it;
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verify the sanctions status and ownership of each bank, processor and intermediary;
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assemble the source-of-wealth and source-of-funds file in advance;
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advise on whether and how to update your account profile, and on explaining an anticipated unusual transfer to the bank before it arrives.
For clients with ongoing cross-border activity, we maintain a standing file, updated annually. It contains:
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an account and entity inventory;
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filing confirmations;
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a source-of-wealth summary;
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a business description with expected volumes and payment channels;
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sanctions review records;
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a log of every communication with each bank.
We also coordinate your accountants, immigration counsel and foreign advisers. Many discrepancies arise simply because separate advisers described the same facts for different purposes without comparing notes. An accurate profile does not guarantee that a payment will be processed, but it lets you answer the next review promptly and consistently.
What you receive: a map of the transfer route with each institution screened, a substantiation file completed before the funds move, and guidance on what to tell the bank and when. Continuing clients also receive a standing file maintained annually.
SANCTIONS EXPOSURE IN ACCOUNTS AND PAYMENT CHAINS
Sanctions questions frequently surface through a bank review rather than on their own. Checking your customer's name against a list is not enough. Exposure can arise from a counterparty's ownership, an intermediary bank, the services supplied, or the payment route. Four features of U.S. sanctions law regularly catch clients unaware.
Who counts as a U.S. person. U.S. sanctions bind "U.S. persons." That includes any foreign national physically present in the United States, while present, regardless of visa or tax status. It also includes any company formed in any state, from the date of formation.
Nationality versus status. Nationality alone is not a sanctions problem. What matters is the identity and status of each bank, processor, platform and counterparty on the date of each transaction. That status must be established from dated sources, not from a screen run today.
The Fifty Percent Rule. Under OFAC's Fifty Percent Rule, an entity owned 50 percent or more in the aggregate by blocked persons is itself blocked, even if its name appears on no list. A lawful business can therefore face a sanctions question solely because of the payment channel it used.
Strict liability. Civil liability does not require knowledge, and the enforcement limitation period is now ten years.
Clients often say "the bank froze my money," but that phrase can mean six different things:
What happened Who acted
Internal hold The bank, under its own policies
Sanctions rejection The bank, refusing a prohibited transfer
OFAC blocking The bank, freezing the funds under sanctions law
Creditor's restraint A creditor, through a court
Tax levy The IRS or a state tax authority
Law enforcement seizure A government agency, through a court
Each has a different authority, a different decision-maker and a different remedy. Before anything else, we identify which one you are facing.
. We trace the ownership and date-specific status of every institution in the chain and classify any hold correctly. For historical conduct, we apply the rules and authorizations in force on each transaction date. For proposed conduct, we identify the applicable prohibitions, exemptions and general licenses. We also prepare specific license applications and blocked-property reports, and we plan lawful exits from accounts at blocked institutions, coordinating with foreign counsel where local currency controls also apply. Where an apparent violation has already occurred, the disclosure decision is handled as part of Section 4.
See OFAC: who must comply and our U.S. OFAC Sanctions page.
What you receive: a written, date-specific assessment of whether historical or proposed conduct is permissible and what authorization it requires. Where needed, this includes license applications and required OFAC reports.
TAX RESIDENCY, FBAR AND CORRECTIVE DISCLOSURE
The documents a bank requests are often the same documents that show:
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whether you were a U.S. tax resident, and from when;
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where services were performed and how your income is sourced and characterized;
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whether foreign taxes can be credited;
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whether your foreign accounts and entities were reported.
The FBAR. An FBAR is required when the combined maximum value of your foreign accounts exceeds $10,000 at any point in the year. A balance that existed for a single day counts. Signature authority alone can create the obligation, even where none of the money is yours.
Separate obligations. The FBAR, Form 8938, and the information returns for foreign corporations, U.S. companies with foreign owners, and foreign trusts and gifts are separate obligations with separate penalties. Filing one does not satisfy another. Paying all tax due does not answer whether they were met.
Inconsistent records. Your bank answers, tax filings and immigration petitions may describe the same facts differently. Some differences are legitimate, such as differences of measurement or period. Others are real discrepancies that require correction.
Diagnosis first. A correction chosen before the problem is understood is often the wrong one. We establish each obligation for each person, each entity and each year, what was filed, what is missing, and what was understood at the time. We also check whether any agency, or a bank reporting on your behalf, has already made contact. We assess civil penalties and potential criminal exposure separately, because a route that resolves one may not resolve the other.
Correction routes. An amended return, a late report, a request for penalty relief and a voluntary disclosure are different tools with different purposes. The available routes include:
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amended returns and late information returns with reasonable-cause statements;
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late FBARs relying on the statutory reasonable-cause exception;
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the Streamlined Filing Compliance Procedures for non-willful conduct;
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the IRS Voluntary Disclosure Practice where willfulness may be in issue;
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OFAC voluntary self-disclosure for apparent sanctions violations, or substantial cooperation where self-disclosure is no longer available.
None of these routes grants blanket immunity.
Timing. Eligibility for IRS voluntary disclosure can be lost once the IRS receives third-party information about you, which may happen before you receive any notice. An OFAC disclosure may not count as voluntary if a bank has already reported a blocked or rejected transfer.
The non-willfulness narrative. We prepare this narrative only after the chronology and discrepancy review, because you sign it under penalty of perjury and the IRS may compare it with what you told your bank.
Sequencing. We coordinate the timing and content of the bank submission and every agency filing, so that each is accurate and none undermines another. See also our FBAR & FATCA page.
What you receive: a written assessment of obligations and exposure by person, entity and year, and a single correction strategy across the IRS, FinCEN and OFAC. Within the agreed scope, we also prepare the filings and submissions and represent you before the relevant authorities.
HOW WE WORK
Preservation. Everything starts here. Keep every email, portal message, statement, invoice and web page. Do not tidy, rewrite or backdate anything. Doing so can turn an explainable discrepancy into evidence of intent.
Privilege. We conduct the internal review under attorney-client privilege. Where appropriate, accountants are engaged through counsel so their work is protected as well.
One coordinated plan. A single set of facts may require decisions involving the bank, the IRS, FinCEN, OFAC and sometimes the Department of Justice. We run one plan across all of them, with a separate timeline for each.
Accuracy. We tell the bank what the evidence supports and identify gaps honestly. We avoid broad assurances such as "all taxes were paid" until the facts have been reviewed.
ACCOUNT RESTRICTED OR CLOSED?
A restriction or closure is usually a commercial decision under the account agreement, but it does not end the underlying questions. Your records survive the closure, and the next bank will ask what happened. Our separate page, Disputing U.S. Bank Account Closure, covers what to do.
REQUEST AN INITIAL LEGAL ASSESSMENT
Whether you are preparing a transaction, answering a bank or addressing a past omission, contact us before you act. In your first message, briefly describe the issue, give any bank or government deadline, and list the countries involved. We will arrange a secure channel for your statements and records.
Please do not send identity documents or account details by ordinary email. Do not ask your bank whether it has filed a suspicious activity report. It is generally prohibited from answering, and the question itself may be noted.
Viacheslav Kutuzov
New York Attorney & Counselor-at-Law (6192033)
admitted to practice before the IRS (No.00144810-EA)
55 Broadway, Floor 3, New York, New York 10006
Phone: +1 646 8374669
