Cash-only depositors mired in ‘structuring’ acts


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Curiouser and curiouser. What else could describe the IRS policy to seize the assets of small businesses or individuals who repeatedly deposit less than $10,000 of cash—but whose transaction behaviors and sources of cash are predictable and in keeping with the nature of their business? Curiouser and curiouser–except that bad advice or lack of knowledge of laws regarding structuring caught them on the wrong side of the law.

A New York Times story this week detailed that seizure behavior by the IRS, featuring the story of small-business owner Carole Hinders in Arnolds Park, Iowa. For 40 years, Hinders has run a small cash-only restaurant and has deposited the cash proceeds from that business in a local branch bank, a branch which was taken over by a new company in 2012. But, according to the Times, IRS agents seized Hinders’ checking account balance of $33,000—without ever accusing her of any crime.

Reporter Shaila Dewan details, however, how Hinders and a number of other business owners involved in seizures unknowingly engaged in prohibited behaviors because of confusion about regulations or on the advice of advisers helping them expedite banking relationships. Hinders recalled how her mother told her that there was a lot less paperwork at the bank if deposits were kept under $10,000. Another family’s business saw its bank close out its accounts due to too much paperwork for the high frequency of large cash deposits, a situation that a financial adviser suggested they remedy by decreasing the size of their deposits below reporting levels and holding cash back to pay vendors.

None of these business owners with cash-heavy businesses intended to run afoul of legal transactions, but the BSA and AML laws regarding cash deposits made their expediency-based behaviors problematic.

AML Partners CEO Frank Cummings said that the law is the law regardless of what your advisers advise you. Said Cummings, “Whenever you hold back cash to prevent a CTR from being filed within a financial institution, you have broken the law. Ignorance is no excuse; neither bad advice nor good intentions are a protection.”

Richard Weber of the IRS Criminal Investigations unit, in response to a Times’ request for an explanation, provided a written statement noting that his office had undertaken a review of its enforcement actions related to “structuring” behaviors such as frequently depositing cash amounts under the $10,000 triggering threshold and acknowledged that their resources would be better focused on structuring behaviors indicative of criminal activity such as terrorist financing or money laundering.

Weber wrote in his statement to the Times that the IRS 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. While the act of structuring — whether the funds are from a legal or illegal source — is against the law, I.R.S.-C.I. special agents will use this act as an indicator that further illegal activity may be occurring.”

For financial institutions struggling with paperwork requirements of the BSA-AML laws, integrated KYC solutions with AML monitoring systems, like SURETY, can automatically file CTRs, thereby lessening the burden on the financial institution, according to Cummings.