The hard part of money laundering

Factual Questions
262

Depends on the semantics of “nailed”. Had assets frozen and then released after investigation is not the same as convicted of an offence. I usually read “nailed” as meaning convicted, or minimally, charged. Frozen assets is neither of these. Very annoying, or worse, for the business, but not really being nailed. Sadly there are always innocent actions that get caught up in pursuit of real crime. Blanket freezing of assets like this is arguably overreach, especially it if endangers legitimate businesses. That is an argument for a more nuanced pursuit of enforcement of the law.

A business that has regular drops of $9k might be well advised, and perhaps should have been by the bank, to ask the bank report the transfers anyway. Minimally the bank should have flagged to the business that there was a danger here. That is the sort of service I would hope a sensible bank would perform. There is no crime in over reporting.

Given the size of the country dumb luck will always yield someone who just happens to have a string of $9k transfers. There may well be more to the story than just the $9k transfers.

263

The one that was prominent in the news, featured in several media - was a couple that ran a restaurant. On a good day in the right season, they went over $10,000 cash deposit. The teller helpfully told them if they made 2 separate deposits under $10,000 they would be able to skip filling out these pesky forms (or she would?). So they did that.

The IRS seized the money, froze the accounts, and the restaurant went belly up because they couldn’t pay bills, rent, payroll, etc. The government said they normally don’t keep the money if the source was legitimate, but at the point the article was written, it had been several months and they hadn’t freed up their funds. (I wonder exactly who comes out ahead with seized money?) Once the press started asking pointed questions about why they kept the money, eventually they got it all back. By then it was too late to reopen the restaurant. IIRC, at one point the government offered some of it back if they would sign something admitting they were guilty and agreeing to not chase after the rest.

Note they were technically guilty, because they did split their deposit to avoid the reporting - but at the suggestion of a bank teller, not knowing it would be illegal.

I believe it was the Iowa restaurant mentioned toward the end in this article:

Let’s re-emphasize:
It is not illegal to do cash transactions over $10,000; or under $10,000.
The IRS will simply want to validate where this cash is coming from, should they be curious. (Because, of course, drug dealing and such is an obvious source of large cash transactions)
A single one-off transaction, or an ongoing legitimate business, will probably not attract attention.

If the IRS is suspicious, they hold all the cards.

But - repeated transactions with no corresponding business reason (or a suspicious one) will attract more attention.
At the very least, they will want to verify all taxes have been paid.
As the current charges at Trump Org. demonstrate, there are payroll (or gift) taxes to be paid by the payer as well as the payee, if this is income.
Except in some circumstances, very large cash transactions are unusual enough to be noted.
Just like - a 21-yo buying liquor - cool. A 21yo buying several boxes of liquor the night before high school grad celebrations - maybe worth looking into.

264

There is nothing illegal about the transactions (necessarily). What is illegal is trying to avoid the reporting mechanism.

It is quite possible to be doing legal transactions that look like structuring. If you do that you will catch the attention of the IRS and they will be asking you some questions. If you can convince them it is all just happenstance then fine. No problem for you. It’ll still be a drag and scary to be under that scrutiny though so, if you happen to have a lot of transactions that fall close to these limits, you might want to think carefully about how you go about it.

265

If your bank advises, and helps, you to break the law, without even telling you that you are breaking the law, the questions start thick and fast. What the hell was the teller thinking?
This seems to be a very unfortunate edge case. Not clear there is much that can be learned. But there really was an overt attempt to circumvent reporting regulations, so there was intent. Just not the way it usually comes about.

There may well be nuances anyway. Restaurants are a great place where various taxes are avoided or underpaid, so perhaps the restaurateurs were open to suggestions of avoiding getting noticed for other reasons. Nothing is ever clear cut and simple.

266

The laws here are funny. If you tell your client that a SAR will be or might be filed, you are in a world of hurt. Even hinting of it could be bad.

You can hand them a FinCEN pamphlet.

Indeed. I was consulting for a bank that had a few clients that did this. Turns out they were not avoiding the CYT, they were avoiding the banks own fees that came with a cash deposit of $10000+! :scream: :flushed:

So yeah, there is often more to the story.

267

Why? (really asking)

If ignorance of the law is no defense how is it “bad” to inform someone of the law?

268

A Suspicious Activity Report makes sense. You can’t tell a customer that you may or will be reporting their activity as suspicious. That becomes complicit in worse offences. That is difficult. An SAR isn’t reporting a 10K transaction, it is reporting potential structuring to avoid triggering reporting.

I guess the advice is hard to phrase. If I was the bank I would be trying to make it clear that it would be a really good idea for the customer to actively report so as not to trigger an SAR. Handing them a well worded pamphlet with such advice authored by the Financial Crimes Enforcement Network with an appropriately raised eyebrow might be reasonable.

In the restaurant case above it seems a little odd. If the bank teller advised the business to break the transactions, one would assume that some other person in the same bank noticed the same transactions and filed an SAR. Perhaps the transactions came to notice in some other auditing process. The bank were as much at fault here, and arguably even more so, as they failed on a whole range of expectations.

269

That was my understanding as well, but I stand to be corrected.

IOW, I want to do $27k worth of cash transactions, (and I am a really private guy so I don’t want any reporting) so I do $9k every day for three days (or once a week for three weeks). I understand that is structuring and illegal.

But @DrDeth seems to be saying that if I want to do $27k worth of transactions, but I then realize that I would have to report and don’t want to report so I then intentionally limit my cash transactions to a one time $9k transaction, that I am still structuring in violation of the law.

I think that if true, it would be incredible. I am deliberately complying with the law.

270

I’m curious what legal reason you (in the hypothetical above) would have for wanting to avoid reporting?

If it is all above-board then just make the $27k transaction. Let the bank send the report.

271

It’s a hypo. Say I’m an anti-government sovereign citizen. I want no reports just because I am hyper sensitive.

272

The irony here is the hyper sensitive sovereign citizen will generate more scrutiny by trying to avoid scrutiny.

273

I understand that. But you just won’t stop punching my hypo, will you? :slight_smile:

274

You deposited $9k and then retain $18k in cash forever more? Never placing that money into a bank? I think we are on the fine edge of just deliberately trying to pick holes in the situation.

That is intent. Since you intended to avoid reporting you had intent to structure. But you never deposited any more money into a bank ever again. Arguably you never went ahead with the structuring. However the scenario is verging on the absurd. You can always construct absurd scenarios that pick holes in the law. The law is written by humans. But we have humans (in the form of the courts) whose job is to pick apart these fine distinctions. You make your arguments to them, and they decide if they are reasonable. That is a cornerstone of our legal system and way of life.

275

A fair point. Suppose I decide that I will use it as walking around money for as long as it lasts. Structuring? Is there no time limit?

If not, it seems that the law is not a structuring law, but a “You shall report always” law if I ever have more than $10k in cash because I have to do something with it.

276

I think you run into trouble when you put it in the banking system.

There is a reason criminals spend a great deal of effort in time and money to launder their money. Having a few hundred ill-gained dollars need never go into the system but when you have many millions you are far past walking around money and need it in a bank so you can buy that mega-yacht.

277

To some extent this is true. Basically the Financial Crimes Enforcement Network want to know about movements of big chunks of money. That helps them stamp out crime. They nominate some round number as the threshold. So there is your reporting law.

However, as I noted earlier, creating a construct with the intent of evading some responsibility is always in general illegal. Constructs might be much more complicated, involving things like shell companies, tax write-offs, money that goes around in circles, and magically no tax is due. Here in Oz the tax commissioner has the right to simply disallow such constructs. I would imagine similar laws and regulations exist in most places. A simple construct to avoid reporting laws is here considered a bit more serious, as we are not avoiding tax, but avoiding laws intended to stymie organised crime. So there are laws with teeth specifically intended to stop structuring. Basically any activity intended to avoid the efforts of the government to clamp down on crime is likely to be viewed dimly. These laws are in addition to the reporting laws. The requirements on banks to file SARs for instance.

Sovereign citizens are in a world of hurt with the law long before the reporting laws affect them. Heck, why do they care? The law does not apply to them anyway, and they can’t be charged with crimes no matter what.

278

Yeah, I guess I’m just shitty about it because they set a limit and then punish you for following the limit because they just know that you are up to something by almost reaching the limit. I guess I also don’t like the idea that I need to report completely legal transactions to the government.

Also, the reason why I say it is a thought crime is apparent. Say I find that $27k in my mother’s house. I am her sole heir, so it is all legally mine. I do one of two things:

  1. I think about it and decide, without considering any reporting requirements, to give $9k to my neighbor who is out of work, $9k to my cousin who is having a rough time lately, and $9k to gamble away at the casino. Perfectly legal. The feds don’t care.

  2. I think about it and decide to gamble all $27k at the casino. But then I realize that I have to report anything over $10k and I am a private person who believes that the government doesn’t need to be in my business. So I foolishly buy $9k in chips on three consecutive days. I am now guilty of a federal felony.

But why? I still spread $27k in cash, which the feds hate, out in each instance. In neither instance did I or anyone spend the cash in a way that is contrary to any public policy. The cash is completely legal.

However because the feds didn’t get a form from me, stating my private none of their business intent of how I want to use my own cash for legal purposes, they want to make me a felon, and take away my gun rights and possibly voting rights?

I guess I’ve complained enough. It is simply a too intrusive law. If they want to fight crime, then fine, but get some evidence and a warrant first. I shouldn’t have to justify my actions so they can inspect and determine legality.

279

I see this is GQ. Apologies or move if necessary.

280

I’d be surprised if the government put you in jail for this.

$27k inheritance is not subject to taxes and spending $9k/day for three days doesn’t benefit you as opposed to spending $27k at once. Maybe you avoid having a report generated that you probably would never know about unless you read this thread (which is the illegal part too…avoiding the report, not reading this thread).

If your (general “you”) only complaint is avoiding government scrutiny as a general goal well, you are living in the wrong country. That ship has sailed.

281

Quick aside:

I am a little ashamed at myself for this. I am all for complaining about the government. Even if something is well established it doesn’t mean you can’t gripe about it and argue for change. Indeed, I think people should do this.