Members of organized crime, drug dealers, and terrorists transact their “business” in cash to hide their tracks. As part of a scheme to launder money (make it look it was earned legitimately), criminals will deposit their ill-earned cash in bank accounts. In response, Congress passed the Bank Secrecy Act, requiring banks to assist the government in catching money launderers.
Under the Act, banks are required to report any cash transaction or combination of cash transactions in excess of $10,000 to the IRS. Knowing this, criminals resort to structuring. Structuring is the deliberate parcelling of a large cash deposit into a series of smaller transactions in order to avoid detection by regulators. When bank officials suspect structuring is occurring, they are required to file a suspicious activity report, or SAR, and notify regulators of what they believe is happening.
In Ratzlaf v. United States, 510 U.S. 135 (1994), the Supreme Court found that government had to prove that defendant acted with knowledge that structuring is unlawful. As a result, Congress removed the “willfulness” requirement making it easier for the government tor prosecute structuring cases. The IRS, however, has been seizing assets of legitimate businesses and individuals without any proof or any charges filed. Small business and individuals can be a target.
In one case, the IRS seized $66,000 from an Army sergeant’s college savings account, even though the sergeant was told by the bank teller to make smaller deposits in order to avoid taxes. Ultimately, the analysis comes down to whether the structuring statute in present form and execution is constitutional. Under the Fifth Amendment, the government cannot take a person’s property “without due process of law.” A person must be given notice and an opportunity to be heard.
In a written statement, Richard Weber, the chief of Criminal Investigation at the IRS, said, “After a thorough review of our structuring cases over the last year . . . IRS-CI will no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the director of field operations (D.F.O.) level.”