Dividing Your Deposits Is a Federal Crime

How you deposit or withdraw your money at your local bank makes a big difference

How you handle currency can define whether you are a law-abiding citizen or are guilty of a federal crime. Whether your money was earned honestly is irrelevant. What really matters is how you deposit or withdraw your money at your local bank.

It’s common knowledge that domestic financial institutions are required to report to the Internal Revenue Service any cash transactions exceeding $10,000,[1] a law that was enacted in 1970 to identify criminal activities such as money laundering, illegal drug profits and tax evasion. While this law did establish a requirement for banks to file Currency Transaction Reports (CTRs), it did not make it illegal for individuals to structure their deposits so that no single transaction exceeded the $10,000 in order to evade the CTR filings.

In 1986 Congress criminalized currency structuring in the Money Laundering Control Act.[2] “Structuring” is defined as conducting one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading reporting requirements.[3] Many people bank with more than one institution and most have more than one account. Making deposits “in any amount” on “one or more days” could place you in a position to be charged with felony currency structuring if it is believed you made the deposits to avoid the CTR filings.

When the law was first enacted, the federal courts were divided on the elements of the crime. Some only required proof that the defendant had knowledge of the reporting requirement and that they intended to deprive the government of that information.[4] Other courts interpreted the statute to require proof that the defendant willfully violated a known legal duty.[5] In 1994, the U.S. Supreme Court granted certiorari to resolve the split in circuits and held that the government must prove the defendant knew structuring was illegal.[6] This ruling expanded the government’s burden of proof by adding that they must show the defendant willfully violated the prohibition on currency structuring by proving “that the defendant acted with knowledge that his conduct was unlawful.” The court noted that under the construction of the statute a person would be culpable for structuring transactions for completely legitimate reasons, such as keeping their financial status confidential (to lessen the risk of being burglarized) or to prevent a former spouse from learning of new wealth.

Congress immediately responded by eliminating “willfulness” as an element of the crime. The Money Laundering Suppression Act (1994) amended section 5324 of the Bank Secrecy Act to make clear that a defendant may not use an ignorance of the law defense in structuring cases. Thus, the government need not prove that the defendant knew that structuring the transaction itself was unlawful.

As the law stands today, the government only has to prove (1) that you made deposits or withdrawals, (2) that you know the law requires your bank to report any transactions over $10,000 and (3) that you intended to deprive the government of information regarding the transaction. Sounds unambiguous? Not really. Courts have ruled the second and third elements can be “inferred” from the proof that you made one or more deposits, on one or more days, at one or more financial institutions. No direct proof of knowledge or intent is required.[7] Proof that the deposits were made provides circumstantial evidence of a pattern. That pattern allows for the conclusion that you have knowledge of the bank’s obligations and that you intended to withhold that information from the government.

Though the law was enacted to detect criminal profits or prevent avoidance of income taxes, the law prohibiting currency structuring is not limited to those involved in criminal activities. Johnny S. Gaskins was indicted and convicted of seven counts of structuring transactions to evade reporting requirements in 2009.[8] His offense was based on numerous deposits of money legitimately earned. He did not gain the money through criminal activity. He did not evade taxes. The funds were duly reported and taxes paid. His crime was depositing money in a bank in denominations under the $10,000 threshold. Gaskins was a successful criminal defense attorney in Raleigh, N.C. He made 38 deposits in a 30-month period that ranged from $2,700 to $9,980. There was no predicate offense alleged to indicate why his actions became the focus of federal prosecutors. Obviously the deposits must have been reported, perhaps by a bank employee, as suspicious activity. While banks are required to report transactions exceeding $10,000, they are allowed (and encouraged) to report any smaller deposits they find suspicious — one or more deposits, made on one or more days, at one or more banks.

Think about it. A suspicious activity report would in turn “red flag” you for possible investigation by the government. The bank and their employees do not notify you that you have been reported. They don’t have to justify their reasons for reporting your activity, and they have complete immunity from liability. Your deposits would then be scrutinized to determine whether you have structured transactions for the purpose of withholding that information from the government.

The statute is only concerned with the methods used to evade reporting requirements, not the source of the money or the defendant’s motive.[9] Whether the cash deposited represents criminal or lawful proceeds is irrelevant when considering the guilt or innocence of someone charged with currency structuring.

In Gaskins’ case, the government sought forfeiture of $355,567, the total of the 38 deposits listed in the indictment.[10] The jury found him guilty of structuring but declined to require he forfeit the money. The fact that he had legitimately earned and duly reported the money may have prevented the forfeiture, but following his felony conviction he was disbarred and is no longer allowed to practice law in the state of North Carolina.[11]

The statute prohibiting currency structuring can also be used in cases of cash withdrawals. In October 2010, Isreal Owens Hawkins Jr., CEO of Petro America Corp., was charged with securities fraud and “aggravated currency structuring.” The charges allege Hawkins knowingly sold unregistered securities to investors and that he made frequent cash withdrawals in amounts less than $10,000 from the Petro accounts in order to avoid the currency transaction reports.[12]

While the charge of structuring is most often coupled with criminal activities such as money laundering or fraud, the case of Johnnie Gaskins shows that the law can be applied as a stand-alone offense. Neither the motive of the individual nor the source of the money is considered. The fact is that one or more deposits, made on one or more days, in one or more accounts, can be inferred as knowledge and intent to commit the crime of currency structuring. That leaves us all vulnerable when handling our financial activities.

Notes

  1. The Currency and Foreign Transactions Reporting Act (CFTRA), also referred to as the “Bank Secrecy Act,” was enacted by Congress in 1970. Current version at Title 31 U.S.C. § 5313.
  2. Title 31 U.S.C. § 5324  states that “no person shall, for the purpose of evading the reporting requirements of section 5313(a) … or any regulation prescribed under any such section … (3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.”
  3. 31 C.F.R. § 103.11(gg).
  4. United States v. Scanio, 900 F.2d 485, 491 (2nd Cir. 1990).
  5. United States v. Aversa, 984 F.2d 493, 502 (1st Cir. 1993).
  6. See Ratzlaf v. United States, 114 S.Ct. 655 (1994).
  7. United States v. Gibbons, 968 F.2d 639, 645 (8th Cir. 1992).
  8. Grand Jury Indictment: United States District Court for the Eastern District of North Carolina Western Division No. 5:09cr112-BR(1), dated Jan. 22, 2009.
  9. United States v. MacPherson, 424 F.3d 183, 193 (2nd Cir. 2005).
  10. The seven counts were comprised of 38 deposits made from April 30, 2004, to Oct. 25, 2006. The individual deposits ranged from $2,700 to $9,980.
  11. Gaskins’ license to practice law in North Carolina was suspended on March 10, 2010, by the Disciplinary Hearing Commission of the North Carolina State Bar. Following his conviction of seven felony counts of violation of 31 U.S.C. § 5324(a)(3) and (d), and 31 C.F.R. § 103.11 for structuring financial transactions with banks for the purpose of evading the reporting requirements of 31 U.S.C. § 5313(a), he was found “professionally unfit to practice law.”
  12. Updates on this case are available at www.justice.gov.usao/mow/petro.html

Cindy Brown CINDY BROWN is pursuing her law degree at the Nashville School of Law. She and her husband, Rocky, reside in Lewisburg. She is a retired Navy chief currently employed at Navy Recruiting District Nashville.