re: the dilemma
I believe they way it went down on the bank is they told there clients that the bank would not have to report to the IRS along with not having to do the paper work which got them into trouble.
If the bank would have just told there clients the rules within IRS's policy and left out not having to do paper work the bank would have been cleared.
The laundrying might have to do with sales tax seeing how this is a local matter.
SteveS