“Structuring”: who can get away with it, and who can’t

by Walter Olson on April 20, 2012

“Structuring,” as readers may recall, is the federal criminal offense of splitting up bank deposits so as to keep them under a threshold such as $10,000 above which banks have to report transactions to the government. Structuring is unlawful whether or not it occurs in conjunction with any other legal offense, as opposed to being motivated by, say, a desire to keep a low profile in general or a sentiment that the government already keeps tabs on too many innocent activities. Nor is there any requirement that the person be aware that there is a law banning structuring; someone who gets wind that transactions over $10,000 are reportable, and decides “What’s up with that? I’ll just make $9,000 deposits”), has broken the Bank Secrecy Act. Indeed, the federal government instructs banks to report suspicious patterns of sub-threshold deposits, and not to warn customers that it is doing so.

So who can engage in structuring and get by with it? Well, it might have a bit to do with who you are:

* On the one hand, as Courtney Mabeus reports in today’s edition of the Frederick News-Post, federal prosecutors yesterday filed a six-page complaint against dairy farmers Randy and Karen Sowers, who own the successful South Mountain Creamery in Middletown, Md. On February 29 Treasury officials showed up at their farm to question them about bank deposits; 45 minutes into that interview, according to the Sowerses, they learned that the federal government had just seized their bank account and the $70,000 in it. The family does a lot of business at farmer’s markets and its cash receipts over a ten-month period exceeded $320,000, the feds say. The News-Post account includes no mention of the family being under suspicion of any offenses other than what U.S. Attorney Rod Rosenstein describes as follows: “The holding back of cash receipts in excess of $10,000 indicates a knowledge of the Currency Transaction Reporting requirement and an attempt to evade it.” The couple is now speaking out about their plight to a wider public; they have hired attorney David Watt, though how they intend to pay him given the seizure of their bank account is not clear from the article. (Update Apr. 21: see also Apr. 18 coverage in Baltimore City Paper; & welcome Radley Balko readers)

* On the other hand, if you are former New York Attorney General Eliot Spitzer, you might not find the federal structuring laws so intimidating. Spitzer had good reason to be intimately familiar with the bank reports system since he had relied on its output in conducting white-collar investigations, and he was “smurfing” deposits in furtherance of conduct that was itself illegal, as he knew well, having crusaded in favor of longer sentences for “johns” as part of his appeal to New York City feminist and legal-services groups. But as Harvey Silverglate points out, “Spitzer, with the help of a high-powered legal team, was able to convince the Justice Department’s lawyers to drop the charges.” Now he goes on TV to denounce the federal government’s failure to prosecute persons in high places.

Maybe they’re too busy going after the dairy farmers.

P.S. The Supreme Court, in a majority opinion by Justice Ruth Ginsburg [Ratslaf v. U.S., 1994], admirably “interpreted the ‘willfully’ element for a currency structuring violation under 31 U.S.C. Sec. 5324 to require proof that the defendant knew the structuring was illegal. Congress responded rather promptly to the Court’s holding by dropping willfulness from the statute.” [White Collar Crime Prof, h/t Sam Bagenstos] (& welcome Prof. Bainbridge, Amy Alkon, Hans Bader readers; & see update.)

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{ 11 comments }

1 Ted 04.20.12 at 10:32 am

If the farmers were depositing money every Monday, I’d be slightly more sympathetic; but they deposited 36 times in 42 weeks, and if they never exceeded $10,000 in that time, that’s suspicious. Well, “suspicious”; what probably happened was that Sowers deposited over $10,000 once, discovered it was a huge pain in the butt to file the form, and did engage in structuring. What almost certainly happened is that investigators got a suspicious-activity-report, looked for drug dealing, didn’t find it, and someone lost sight of why suspicious-activity reports are important.

But one would expect some prosecutorial discretion to be involved if the Sowers are correctly reporting their income. But maybe they’re not. I was curious if this was a political prosecution, and did some research; what I found makes me a little reluctant to adopt the cause of the Sowers until I have more information.

2 Mark Biggar 04.20.12 at 2:46 pm

The following “The holding back of cash receipts in excess of $10,000 indicates a knowledge of the Currency Transaction Reporting requirement and an attempt to evade it.” Seems to imply that not making any deposits at all and just spending any cash you receive (over $10,000) directly on other things can be considered a form of structuring.

3 Shtetl G 04.20.12 at 3:44 pm

320,000 in 10 months comes out to 8000 a week. They made 36 deposits in 42 weeks which is not every week but is still pretty close to a weekly deposit ( which still comes out to less 10,000 a deposit). If you factor in that some of that money was used for legitimate business expense pay outs, that would make the cash deposits even less. Are they supposed to keep more cash on hand for longer times to meet these requirements? If the dairy farmers committed some type of tax evasion they should be charged with that crime but otherwise it looks like they were just running their business and making weekly deposits. Now they have lost 70 grand and will serious cash flow problems and probably lose their business.

4 nevins 04.20.12 at 6:23 pm

“The holding back of cash receipts in excess of $10,000 indicates a knowledge of the Currency Transaction Reporting requirement and an attempt to evade it.”

Where knowledge of the law is evidence of criminal intent? Is ignorance of the law then a recognized defense.

5 David Schwartz 04.20.12 at 9:02 pm

nevins: Yes, but ignorance of the law you’re charged with violating is not. They’re not charging you with failing to make a currency report but with evading the making of a currency report. You can’t evade something you don’t know exists. A person who has no idea what the criteria are for reporting transactions cannot possibly structure transactions to avoid those reports. So, “I had no idea what the reporting criteria are and thus couldn’t have been trying to evade reporting” is a defense. But, “I had no idea it was illegal to evade the reporting requirements” is not.

6 Mister Brickhouse 04.21.12 at 9:09 am

The $10K requirement has been reduced to $3K
http://www.fincen.gov/financial_institutions/msb/materials/en/bank_reference.html

Essentially banks can report whatever they feel like if you seem like a money laundering type. Cash is likely to disappear over the next 10 years anyway.

7 Walter Olson 04.21.12 at 9:30 am

MB> $10K for some kinds of transactions, $3K for some others, I believe. The $10K threshold appears to be the relevant one in the Maryland case.

8 Bill Alexander 04.21.12 at 10:15 am

I am curious. How does this law on money laundering affect large retail stores that get more than $10 per day in cash?

9 David Schwartz 04.22.12 at 6:36 pm

Bill Alexander: Assuming you mean $10,000, and assuming they just deposit all the money in a single bank account each day, it doesn’t affect them at all. But if they split the money among two or more bank accounts and either deposit winds up under $10,000, withhold some cash from deposits and that brings their deposits under $10,000, or make multiple deposits during the day that are all under $10,000, that could get them into trouble.

10 Concerned 04.27.12 at 3:04 am

Ted, they make political donations and it’s of concern? Why, because you vote Republican? If they’re innocent, they’re innocent, no matter who they vote for.

This just looks like a new way for the IRS to shake down small businesses without protection (legal departments). Bullies always seem to have a good sense of who the potential victims are.

Pretty soon it’s going to get to the point where it’s considered criminal if you carry any cash.

11 Steven P. Cornett 04.27.12 at 7:23 am

Many would say this is worse than anarchy, since in anarchy everyone knows that only the rich and powerful are going to be secure from theft and murder. In this system, the legal system exists to provide the illusion of justice, but the reality of preference for the powerful lies underneath.

In fact, it is what you find in empires as St. Augustine so eloquently remarked when he wrote, “Justice being taken away, what are empires but vast robberies and robbers but little emperors?”

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