Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

BANK SECRECY ACT, An Overview

Passed in 1970, the Bank Secrecy Act (BSA) was the first set of laws specifically designed to combat money laundering.  In fact, it is sometimes referred to as the “Anti-Money Laundering Law (AML)” or “BSA/AML.”  The BSA has been amended over the years by the addition of other anti-money laundering laws, including the Patriot Act.  The BSA requires business and financial institutions to keep records and/or file reports of certain transactions and activity.  The records and reports are especially useful to government and law enforcement activities in detecting money laundering, tax evasion, terrorism and other criminal activities.

As a practical matter, the government knows everything that you do with a bank. The government requires banks to have sophisticated computer programs in place that are monitored by experienced knowledgeable people that look for every kind of possible wrong doing; whether the possible wrong doing is done with one branch of one bank, or different branches of the same bank, or done on different days or done with multiple banks.  The bottom line is that whatever scheme you can think up has already been thought up and guarded against and trying any of them will only result in the bank reporting you and your transactions to a variety of government agencies who can prosecute you on very serious felony charges which can result in many long years of imprisonment and extremely large monetary penalties.
 
Bank Reporting Requirements

While the BSA mandates reports or records from certain individuals and businesses, much of the law institutes reporting and recording requirements for banks and other financial institutions.  Every currency deposit, withdrawal, exchange of currency or other payment or transfer involving more than $10,000 must be reported on a Currency Transaction Report (CTR). While there are certain exemptions, such as transactions between a bank and other banks, governmental agencies or entities on the NYSE, etc., the financial institution is required to file a designation of exemption. 
 
Banks also must report any suspicious transactions or attempted transactions.  A Suspicious Activity Report (SAR), found here, must be filed if one or several related transaction involves $5,000 in non-fact to face transactions and $2,000 in face to face transactions and the bank knows or believes that the transaction:

  • Involves funds from illegal activities, or
  • Is intended to hide or disguise funds or assets from illegal activities in order to violate or evade any federal law or regulation or to avoid a transaction reporting requirement, or
  • Is designed to evade the regulations created under the BSA, or
  • Has no business or lawful purpose or is not the kind of transaction a particular customer normally engages in and, after looking at the background, facts, and possible purpose of the transaction, the bank cannot reasonably explain it.

Penalties for failing to Report Suspicious Acts

Financial Institutions are required to file these reports.  A fine of the greater of $25,000 or the amount of the transaction (not to exceed $100,000) will be imposed upon a bank that fails to file a CTR or SAR.  Even negligence on the part of a bank may cause it to be fined $500 for one violation or $50,000 for a pattern of negligence.  Conversely, there is no penalty for reports that are not necessary.

Privacy Issues

In 1986, as part of the Money Laundering Control Act, Congress stated that a financial institution would not be held liable for the sharing of information relating to suspicious activity.  As concerns grow regarding money laundering and terrorism, privacy rights become diminished.  Financial institutions report a client’s name, address, social security number, driver’s license number and more.  Any transaction of $10,000 or more will require that a customer’s information be shared.  Also, the language of the regulation may make it necessary to report totally legal transactions of $5,000 or more because the transaction is not the kind the customer normally engages in.  The reports are filed with the Treasury Department’s Financial Crimes Enforcement Network and thereafter they are available to the FBI, Secret Service, Customs Service, every U.S. Attorney’s Office and several other law enforcement agencies.  Agencies can access the reports without the normal evidentiary requirements that would normally need to be shown before gaining access to the information.

White Collar Crime, Structuring

Federal law requires business and financial institutions to report currency transactions in excess of $10,000 in a single or “related” transaction within a twelve-month period.  Businesses must file an IRS form 8300 and financial institutions must file a currency transaction report. Even though making a deposit or withdrawal greater than $10,000 in currency is often not connected to any illegality, this reporting requirement helps the IRS, to track suspicious criminal activity including tax evasion and other crimes.  This information is also shared by a variety of other government agencies.

“Structuring”, pursuant to U.S. Code § 5324, is the process whereby a person, or persons, attempting to trick the business or financial institution, whether domestic or foreign, into not filing the required report by breaking the single transaction into pieces smaller than $10,000 each within the twelve month period. You can be convicted of the federal felony of structuring even though the money was always legal and you paid all your taxes. Regardless of where the money came from or what the money will eventually be used for, a person suspected of structuring a transaction to evade reporting requirements may be prosecuted.  The illegality is solely the attempt to avoid the reporting requirements.

Prior to September 23,1994 the government had to prove that the defendant knew about the federal law requiring the bank to report currency transactions in excess of $10,000 and also the defendant’s obligation not to try to trick the bank into avoiding the reporting requirement.  Effective September 23, 1994 the Congress changed the law as it was decided by the United States Supreme Court in Ratlaf on January 11, 1994, 510 U. S, 135, requiring a structuring conviction to have “willfulness”. This change in federal law makes it much easier for the government to obtain a conviction because the “willfulness” requirement was removed.  Therefore, the government now only needs to prove that the defendant had the purpose of trying to avoid having the bank file the currency transaction report or the business filing IRS form 8300.

Anyone convicted of violating anti-structuring laws is guilty of a federal felony and could serve many years in federal prison in addition to potentially, huge monetary penalties. Further, since structuring is its own crime, sometimes, a structuring case or investigation lead to additional charges, such as, tax evasion, because the movement of money may allow the person structuring to avoid taxes. It’s important to remember that structuring may alarm authorities to suspected tax evasion and other serious charges. 

A consideration in the case of former New York Governor Eliot Spitzer was whether he committed structuring, among other crimes, in the payment of $20,000 in four installments to a prostitution ring.

Radio show host Rush Limbaugh was considered for prosecution on structuring charges when within twelve months he withdrew cash exceeding $10,000 in multiple amounts each less than $10,000 from his bank.  There was never any allegation that Rush had acquired the money illegality or that he had any tax problems, only that he may have committed the crime of structuring.  On Rush’s radio show he commented that he was being considered for prosecution for “withdrawing his own money” and Rush was correct in that structuring makes how you deposit or withdraw the money the crime.

Most people that are prosecuted under the structuring law are not famous; they are common business people, or even people that do not even own a business.  For example, a police officer was found guilty of structuring when he re-deposited cash in excess of $10,000 in multiple deposits of less than $10,000 each from the very banks from which he had earlier withdrawn it, United States of America v. William MacPherson, 424 F. 3d 183, decided September 13, 2005.   In an another example, a newly married couple also faced structuring charges when they deposited their cash wedding gifts in excess of $10,000 in multiple deposits of less than $10,000 each in multiple financial institutions.

Businesses can file a form 8300 with the IRS for a cash transaction less than $10,000 if they think the transaction is suspicious.  Banks file a Suspicious Activity Report if they think a transaction is suspicious. Almost 50% of the depository institution Suspicious Activity Reports filed to date lists structuring as the suspected violation.
 
All that the government must prove is that the person intended to trick the financial institution or business into not filing the required report, not that the person intended to commit a crime by violating the provision. So while structuring is not always done to conceal another crime, it is a crime itself, regardless of the desire to violate the law.  Because intent is so important, and the understanding of an often complex string of financial transactions must be understood and presented either by direct or circumstantial evidence to the government or a Judge and jury, our law firm, with its financial, criminal and civil expertise is extremely well suited for this type of often very complex case depending on a myriad of possibly interrelated financial transactions and the understanding and presenting of them.

We defend clients against any type of financial criminal or civil charge. While focusing on complex white-collar crimes, our San Francisco financial district attorneys have a proud record of accomplishments in a wide range of financial criminal and civil cases. We have represented businesses and individuals, and their spouses, accused of a wide range of financial wrong doing, including defending individuals charged with sophisticated financial crimes, such as, tax fraud and a wide variety of financial crimes and the related civil financial and tax accusations that usually accompany those charges to name just a few, whether at the same time as the criminal case or after the criminal case.  Whatever the charge, our clients benefit from our full attention to their case supported by more than 30 years of experience and a dedication to the person as well as to the case.  We have the team you need to defend the serious charges against you, including, but not limited to, tax attorneys, criminal attorneys, CPAs and others, all working together for you and your case.  We never forgot that you have entrusted us with your personal freedom and the assets and income that you have worked a lifetime to obtain.

We regularly appear in court on tax and other types of fraud, and as a result of our wide-ranging legal practice, we have the experience you need to represent you before the IRS, US Department of Justice, State of California, and a variety of regulatory agencies. If you've been accused of a misdemeanor or a serious felony, our goal is always the complete dismissal of all charges. If this isn't possible, we often negotiate solutions for our clients that allow them to avoid prison and sometimes even prosecution. We understand that the best result is to avoid any prosecution, and have all the charges dropped, and our significant government experience helps our clients navigate the difficult and often frightening process of investigation. Our extensive experience with compliance programs helps us advise you on the best practices to prevent criminal problems from developing.  Yet, if you face criminal charges, we have the extensive trial experience to mount a vigorous defense on your behalf.

Our law firm's broad range of substantive experience permits us to offer an integrated approach to a full range of tax, criminal and civil situations. Criminal and government enforcement activities usually do not appear in isolation; they are often accompanied by parallel proceedings, civil litigation, and/or other governmental agency investigations. Our team of  tax attorneys, criminal attorneys,  CPAs and others, enables you to have an efficient and comprehensive defense.  We invite you to contact our law firm to discuss your legal situation.  Schedule your complimentary attorney client privileged consultation by calling (415) 394-7200 or use our contact form to email us.