In addition to the money-laundering, lifestyle, income tax, etc
issues discussed already in other answers, one other matter that
might concern the bank is whether that cash you are bringing in
to deposit is genuine currency or (some or all of) the bills
are counterfeit and you are using this mechanism to get them into
circulation. Even if you withdraw a very large amount in cash
from your bank, step out the door and come back just a few
minutes later saying that you have changed your mind and want
to put that money back into your account, there is still the question
as to whether the cash you have brought back is exactly the
same as you took out or a substitution was made in the interim.
I once needed a bank draft for $1000 and went to my bank
to get it, taking with me a check made out to Cash for $1003
(the bank's fee was $3). The bank would not give me a bank draft
in exchange for the check, or if I cashed the check right
then and there and paid for the bank draft using the cash
that the teller had just handed me. I had to tear up the
check, write another one payable to the bank, and then
I got my bank draft. As JoeTaxpayer says, it is a matter of
Additional matter added in edit:
According to Wikipedia, because of the
Bank Secrecy Act of 1970,
Many banks will no longer sell negotiable instruments when they are purchased with cash, requiring the purchase to be withdrawn from an account at that institution.
which was exactly my experience. Furthermore, even the banks that
will still sell you a cashier's check or money order for cash must
keep a Monetary Instrument Log (MIL) that records all such
cash transactions for amounts between $3000 and $10,000, keep
the records for at least five years, and produce it upon request of a bank examiner or auditor
(and presumably upon subpoena by a district attorney or divorce lawyer).
Cash transactions of $10,000 or over are, of course, reported to the
IRS on Currency Transaction Reports. In short, a paper
trail exists for some time even for cash transactions quite a
bit smaller than $10,000.