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How Do the Insanely Wealthy Actually Pay for Something Worth Hundreds of Millions of Dollars? - YouTube
Channel: Today I Found Out
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As weâve discussed before, there are a handful
of people walking around right now with a
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hyper-exclusive jet-black American Express
credit card in their wallets that they could
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theoretically use to buy anything currently
for sale, regardless of its cost.
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In fact, the current record we could find
charged on such a credit card is $170 million
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charged by Chinese billionaire, Liu Yiqian,
who no doubt is the world record holder for
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those sweet, sweet flight mileage points.
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But letâs imagine for a moment that a super-rich
person didnât have such a card or for whatever
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reason wanted to buy something worth millions
of dollars not with a credit card, but cash.
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Could they?
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Well, surprisingly, in many countries no,
with some exceptions.
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So letâs now talk about how the uber-wealthy
actually go about paying for things worth
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millions upon millions of dollars.
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To begin with, for the most part, paying for
something worth a pile of Ferraris is the
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same as paying for any other item, with the
fancy auction houses and stores we researched
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all offering the same basic payment options
as stores for us peons.
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For example, Sothebyâs auction houses notes
that customers can pay for any items they
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purchase âby bank transfer, cheque or cash
(subject to any restrictions and legal limits)â
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while famed luxury superstore Harrods notes
that you can pay for any item they have for
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sale with PayPal if you really wanted to.
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As for how the immeasurably wealthy actually
end up paying for such items, most of the
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time they just put it on their card.
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What about transaction limits, you say?
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As you can probably imagine, the credit cards
used by millionaires and billionaires are
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different to the ones doled out to us mere
mortals and come with a host of additional
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benefits to ensure the holder doesnât up
and take all of their money elsewhere.
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Although the existence of these cards isnât
exactly a secret, banks that issue them donât
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usually allow customers to apply for them,
instead in most cases invite particularly
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wealthy customers to use them.
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While the most famous of these cards is arguably
the Black American Express card alluded to
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at the start of this piece, there are a number
of similar credit cards out there that fulfill
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essentially the same function, in that they
allow the holder to buy any item they wish
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regardless of its value and provide a ridiculous
number of services that come for free with
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simply having the card at all, including what
almost amounts to something of a personal
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assistant in some sense, or at least someone
who can figure out how to make whatever you
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want to happen, happen.
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This might be something as simple as tracking
down tickets to a sold out show and acquiring
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them, to more outlandish requests.
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If your imagination isnât all that great,
according to one executive at Amex asked about
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the more bizarre requests the company has
fulfilled on behalf of customers holding their
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Centurion card, he noted they had a card holder
once call up and ask for a handful of sand
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from the Dead Sea be delivered to their address
in London.
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The company handled it from there, sending
an international courier to the shores of
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the Dead Sea on a motorcycle.
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The courier then posted the sand to the customer.
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Apparently the sand was to be used in a school
project for the customerâs kid.
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In another case, the cardholder wanted to
appear on a soap opera, but wasnât sure
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how to make this happen.
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The Amex representative managed to get the
woman an audition for a role in such a show.
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Yet another bizarre request was from someone
wanting Amex to find the horse ridden by Kevin
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Costner in Dances with Wolves.
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They were not only able to track this down
for the customer, free of charge for this
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sort of service, but were also able to arrange
for purchase of the animal and then had it
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transported to Europe where the customer lived.
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In any event, contrary to popular opinion,
these cards do often have a maximum limit,
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itâs just that this limit is informed by
the holderâs personal wealth and the relationship
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they have with their respective bank.
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So in the case of billionaires and the like,
since any theoretical limit put in place would
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exceed the value of almost any item available
for purchase on Earth, itâs easier to just
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say the card has no limit, even though the
bank would almost certainly query such an
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individual trying to charge a billion dollars
to their card unless they got pre-approval
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for the transaction.
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In the event a billionaire, for whatever reason,
decided that they instead wanted to pay for
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something worth millions of dollars out of
pocket rather than putting it on a credit
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card, they could just as easily also pay using
a debit card or a personal check.
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As with credit cards, thereâs no set limit
to the amount of money an individual could
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spend in this manner on a single transaction.
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There would just be similar caveats to the
credit card payment method of certain transactions
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likely to be double checked if they were truly
outlandish and out of the ordinary for a given
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account holder.
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And, of course, in these cases the one added
caveat of the money needing to be in their
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account at the time, unlike a credit card
purchase.
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On that note, for anyone curious, the largest
known personal check ever written was for
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$974,790,317.77 in 2014 by one Harold Hamm
to pay his ex-wife a court mandated settlement
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after a divorce.
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Amazingly, Hammâs ex-wife originally refused
to cash the check, feeling the amount was
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too small given Hammâs then net worth of
$18 billion.
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However, she abruptly changed her mind the
next day and cashed it anyway.
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According to Forbes, the process of cashing
the check went ahead mostly like any other,
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with the exception of the bank calling Hamm
to make sure the check was genuine before
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depositing the money into his ex-wifeâs
account.
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The largest known business check on the other
hand was written in 2008 by the Mitsubishi
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Financial Group to basically bail out Morgan
Stanley during the 2008 financial crisis.
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The total amount?
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A cool $9 billion.
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Itâs noted that ordinarily such a massive
amount of money would have been sent via a
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wire transfer but because the day the money
was needed was Columbus Day (a day banks are
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closed) Mitsubishi decided to just cut Morgan
Stanley a check instead of waiting for the
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banks to reopen.
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Youâll note in all of this that weâve
not yet dealt with the issue of paying cash.
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Interestingly, even though a billionaire could
pay for a $100 million yacht with a personal
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check or use a debit or certain credit cards,
as alluded to previously, they generally couldnât
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pay with cash.
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Why?
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Well, to put it simply, nobody would accept
it and even the payer probably wouldnât
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want to pay this way either as there are a
surprising number of very serious laws that
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are easy to unknowingly break when talking
about handling large sums of cash.
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While, for example, U.S. law dictates that
any debt (regardless of size) that the debtor
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attempts to settle with cold hard cash cannot
be refused (U.S. Code Title 31 §5103), when
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looking at buying something directly, it would
seem no such guarantee to be able to use cash
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is available, and this seems to be true in
many nations the world over.
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Beyond this, although most banks we researched
note that thereâs generally âno limitâ
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to the amount of money a customer can theoretically
withdraw from their account at once, in practise
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actually walking into a bank and attempting
to withdraw a million dollars, even if you
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can easily afford it, is a bit of a process.
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For starters, many banks simply donât have
all that much cash held in reserve at any
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one time, so a request to withdraw such a
large amount quite literally couldnât be
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physically honored in many cases.
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For this reason, most banks the world over
ask that customers wanting to withdraw large
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amounts of cash should call several days ahead
so that accommodations can be made.
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If a customer does call ahead to their bank
with a request to withdraw an especially large
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amount of money, providing they have the money
in their account and can prove who they are
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over the phone, there really shouldnât be
any issues in getting money within a reasonable
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time frame, though understandably the more
money you request, the longer it will take
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to be delivered either to the bank or your
home.
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Further, most who do this should expect to
have the bank look into what theyâre planning
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on using the cash for to make sure the customer
is not being scammed.
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For the super wealthy, however, theyâre
likely to face much less scrutiny on that
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front, especially if withdrawing such large
sums is a frequent thing for them.
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For example, a man known to do exactly this
is boxer Floyd Mayweather, who revealed in
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an interview that he periodically has millions
of dollars in cash delivered to his home by
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his bank, largely just because he can.
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In keeping with his nickname âMoneyâ,
Mayweather has been known to, at least in
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a few instances, walk around with more than
a million dollars in cash on his person and,
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seemingly in desperate need of a financial
advisor heâll actually listen to, was once
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observed flashing a bank receipt showing that
he had over $100 million, in his checking
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account.
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On the less flashy and more humble side of
carrying a lot of cash, keeping with his overall
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âcool guyâ persona, in 2013 George Clooney
gathered up 14 of his closest friends and
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presented each one of them with a briefcase
containing exactly $1 million in cash.
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The star explained to his stunned friends
that the money was a gift to thank them for
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their support when he was just a struggling
actor, reportedly stating:
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Listen, I want you guys to know how much youâve
meant to me, and how much you mean to me in
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my life.
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I came to L.A., I slept on your couch.
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Iâm so fortunate in my life to have all
of you, and I couldnât be where I am today
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without all of you.
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So, it was really important to me that, while
weâre still all here together, that I give
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backâŠ
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I know weâve all been through some hard
times, some of you are still going through
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itâŠ
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You donât have to worry about your kids;
you donât have to worry about school; you
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donât have to worry about paying your mortgage.
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Going back to somewhat more non-charitable
examples, Mayweather is by no means an outlier
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in this regard and numerous celebrities and
millionaires who apparently donât understand
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inflation and the power of compounding interest
have been observed withdrawing obscene amounts
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of money from their checking accounts either
to show off or make it rain especially hard
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that day.
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And donât even get us started on Nicholas
CageâŠ
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Something they generally donât do, however,
is spend all that money at once in a single
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place because a lot of businesses wonât
accept that much cash in one transaction.
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Along with the obvious issues of security
and practicality when it comes to accepting
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payment for something worth millions of dollars
in cash, especially large cash deposits often
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come with a lot of additional scrutiny from
both banks and the respective government of
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the country youâre making them in.
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In the UK, for example, under current UK Money
Laundering Regulations any business or sole
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trader that accepts cash payments in excess
of ÂŁ10,000 has to register as a âhigh value
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dealerâ with HMRC and accepting a cash payment
of this magnitude without doing so carries
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heavy penalties.
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Business and individuals who are âonly ever
paid large amounts by credit card, debit card
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or chequeâ on the other hand arenât required
to do this and as a result, many UK businesses
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will simply not accept cash payments in excess
of this amount.
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Likewise, in the United States, banks are
required by law to report individual cash
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transactions of $10,000 or more to the IRS
under the Bank Secrecy Act of 1970.
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Additionally under current US tax law, all
individuals and most (but not all) American
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businesses are required to report any individual
cash payments of $10,000 or more to the IRS,
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even if the money isnât deposited into a
bank account.
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As in the UK, most businesses donât want
this kind of hassle so tend to avoid accepting
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payments in excess of this amount.
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And failure to follow the rules on this sort
of thing comes with both heavy fines and,
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for individuals, even potential jail time.
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It is noteworthy that the relatively small
amount of $10,000 as the trigger point has
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been something widely railed against in recent
years given this figure has not been adjusted
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for inflation since the law was established
in 1970.
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For your reference, $10,000 in 1970 would
be about $65,000 today.
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Curiously, one of the few places we found
that doesnât specifically seem to limit
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the amount a customer can pay at once with
cash are auction houses.
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That said, as you may have noticed when we
listed the payment methods accepted by Sothebyâs
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earlier, the auction house has a disclaimer
about cash payments, noting that all such
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payments are âsubject to any restrictions
and legal limitsâ.
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The auction house isnât exactly forthcoming
with what exactly these supposed âlegal
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limitsâ are and itâs noted in the book
Money Laundering Through Art: A Criminal Justice
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Perspective that the auction house has never
really made it clear how much cash theyâre
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willing to accept at once for a piece they
sell.
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The same is true of Christieâs who donât
even make mention of a limit on cash payments
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on any official documentation theyâve ever
released.
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This is largely because auction houses in
the US are under âno specific obligation
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to report any suspicious operationsâ to
the authorities, unlike many other institutions
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that handle large sums of money.
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Because of this, an auction house is likely
the only place, at least in the United States,
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where you could conceivably pay for something
worth millions of dollars in cash and not
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have it be that big of a big deal.
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Itâs worth noting that your bank would still
report the withdrawal of the cash to pay the
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auction house to the IRS who in turn would
probably be very curious about where exactly
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the money went come tax season.
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Thus, the insanely wealthy person could very
much expect to get a call about what they
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were doing with those funds, or at least their
accountant would likely get such a call.
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Unsurprisingly from all this, while itâs
technically possible to pay for something
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worth millions of dollars at an auction house
with cash, in relatively recent history with
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so many other more convenient ways to pay,
we were unable to find any evidence of such
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a transaction ever taking place, though presumably
Floyd Mayweather has had some whopper of cash
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payments for things over the years, unless
heâs just re-depositing that cash he withdraws
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after heâs gotten sufficient âshowing
offâ mileage out of it.
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Either way, given the truly shocking number
of laws there are concerning large cash transactions,
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opening oneâs self up for scrutiny from
the IRS is something even the obscenely wealthy
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donât enjoy.
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Those guys got Al Capone- they can get anyone.
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