Federal Money Seizures Based on Alleged “Structuring” Violations are Unfair to Most Small Businesses
Update – The Department of Justice has recently revised its Asset Forfeiture Policy to try to address this problem. The Department says it will no longer seek forfeiture of assets unless a person is also charged with some underlying criminal conduct. That’s a great idea, but I think the policy is not nearly enough to solve this problem.
The Baltimore Sun described the plight of a small Maryland dairy farm that found itself ensnared by the federal government when it ran afoul of a “bank structuring” law that applies to all bank deposits but that many, including small business owners, are often unaware of. Federal agents descend on South Mountain Creamery, charged its owners with felonies punishable by up to five years imprisonment and $25,000 fines for each violation, and seized $70,000 from the farm’s bank accounts, without a trial or any finding of guilt, and without even an accusation of any criminal acts aside from making too many bank deposits under $10,000. Yes, it happens.
Under the Bank Secrecy Act, codified as part of the Internal Revenue Code, any person or company that receives more than $10,000 in cash in the course of business in one transaction or in two or more related transactions must file a Form 8300 with the IRS within 15 days. A Form 8300 includes the person or company’s taxpayer identification number, the name and address of the payer, the amount received, and the date and nature of the transaction. This Currency Transaction Reporting law is intended to prevent money laundering and fraud by organized crime, drug dealers, and other legitimate businesses that deal largely in cash. By having a record of large cash transactions that businesses and individuals engage in, the IRS and federal law enforcement are better able to identify crime that would otherwise be hidden without a paper trail.
The requirement to file Form 8300 applies to all individuals and businesses, even lawyers when they accept large cash payments from clients. And while the requirement does not apply to transactions of less than $10,000, it is also illegal under the Bank Secrecy Act to “structure” payments or deposits in order to avoid the reporting requirement. As the South Mountain Creamery unhappily discovered, making multiple deposits of $9,000 in an attempt to avoid filing Form 8300 is a felony, punishable similarly to not filing the form on covered transactions. Banks are even required by law to inform the government when clients make multiple deposits just under $10,000. The deposits do not need to be illegal proceeds or connected to any other illegal behavior. The crime is the deposits themselves. And worst of all, Congress has changed the law so that individuals may be prosecuted even if they were unaware that “structuring” was illegal.
As the Baltimore Sun described, powerful and high-profile violators of the Bank Secrecy Act are often the least likely to actually be successfully prosecuted. Former New York Governor Eliot Spitzer was able to avoid prosecution, even though he had spent his earlier career prosecuting white collar crimes and actually knew that “structuring” was illegal. Meanwhile, the government aggressively chases small game like the owners of the South Mountain Creamery and other small business owners who have difficulty mounting an effective defense and who the government believes won’t be able to afford to pay the legal expenses of fighting to get their money and other assets back. Some government agents and prosecutors will also intimidate business owners with threats of criminal charges if they try to petition the courts to force the government to return seized funds.
Our federal criminal attorneys have successfully represented several clients accused of bank structuring violations as well as clients whose assets have been seized by the federal government under other forfeiture and seizure laws. All too often, the federal government will seize a company or individual’s accounts, threaten criminal prosecution, but decline to bring criminal charges if you do not challenge the seizure. Such behavior by the federal government is highly unethical and offensive to every person who values protections of individual rights against the government and takes the constitutional presumption of innocence seriously. An experienced federal defense attorney can help you protect your rights and challenge the government when it overreaches in attempting to rob you of your assets without due process of law.