31 U.S.C. § 5322 – Money laundering-related reporting offenses

March 21, 2024 Uncategorized

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1 31 U.S.C. § 5322 – Money laundering-related reporting offenses

31 U.S.C. § 5322 – Money laundering-related reporting offenses

Money laundering involves hiding the origins of money obtained through criminal activity. It allows criminals to enjoy the profits of their crimes without drawing the attention of law enforcement. 31 U.S.C. § 5322 is a federal statute that criminalizes certain money laundering-related reporting offenses.

This law is part of the Bank Secrecy Act (BSA), which aims to detect and prevent money laundering. The BSA requires banks and other financial institutions to keep records and file reports on cash transactions over $10,000[1]. These reports help law enforcement identify potential money laundering.

Overview of 31 U.S.C. § 5322

Section 5322 imposes criminal penalties for violating certain BSA reporting requirements. It states that a person who “willfully” violates:

The requirement to report exporting or importing monetary instruments over $10,000 (31 U.S.C. § 5316)
The requirement to report receiving cash over $10,000 (31 U.S.C. § 5331)
The prohibition on structuring transactions to evade reporting requirements (31 U.S.C. § 5324)

may be fined up to $250,000, imprisoned for up to 5 years, or both[2]. For violations after a prior money laundering conviction, the penalties are even higher.

Key Elements of 31 U.S.C. § 5322

“Willfully” Violating BSA Requirements

To be convicted under § 5322, a defendant must have “willfully” violated the law. This means they knew about the reporting requirement and intentionally violated it anyway[3]. Recklessness is not enough.

For example, if a person smuggles more than $10,000 cash out of the U.S. without filing a report, despite knowing about the reporting requirement, they may have willfully violated § 5316.

No Good Faith Defense

Unlike some statutes, § 5322 does not allow a good faith defense. Even if the defendant believed they were not violating the law, this is not a defense if they actually knew about the reporting requirement[4].

Violations as Specified Unlawful Activity

Violating § 5316, § 5331, or § 5324 can also qualify as “specified unlawful activity” under the federal money laundering statutes (18 U.S.C. §§ 1956, 1957) [5]. This allows prosecutors to bring additional charges.

Reporting Requirements Under § 5322

31 U.S.C. § 5316 – Reports on Exporting or Importing Monetary Instruments

Section 5316 requires anyone transporting more than $10,000 in monetary instruments into or out of the U.S. to file a report with U.S. Customs. This includes transporting cash, checks, stocks, etc. [6].

Many money launderers try to sneak large amounts of cash across the border undetected. Failing to file a § 5316 report could signify an attempt to launder money.

31 U.S.C. § 5331 – Reports Relating to Coins and Currency Received in Nonfinancial Trade or Business

Section 5331 requires a business receiving more than $10,000 in cash in one transaction (or two or more related transactions) to file a report with the IRS. Common examples are car dealerships or jewelry stores.

This helps law enforcement identify potential money laundering through businesses.

31 U.S.C. § 5324 – Structuring Transactions to Evade Reporting Requirement Prohibited

“Structuring” means breaking up cash transactions into smaller amounts to avoid triggering the $10,000 reporting threshold. Section 5324 prohibits structuring when done intentionally to evade reporting.

For example, depositing $9,500 cash each day for a week to avoid filing a report could violate § 5324. This commonly signals an attempt to launder money.

Penalties Under § 5322

For willful violations of § 5316, § 5331, or § 5324, § 5322 imposes:

Up to 5 years imprisonment
Up to a $250,000 fine for individuals, $500,000 for corporations
Or both fine and imprisonment

Harsher penalties apply for violations after a prior money laundering conviction under § 1956 or § 1957. In that case, the penalties are up to 10 years imprisonment and a fine of up to $500,000 for individuals or $1,000,000 for corporations.

Defenses

Possible defenses to § 5322 charges include:

Lack of “willfulness” – the defendant did not know about the reporting requirement
No intent to structure – the transactions were structured for a legitimate reason, not to evade reporting
No knowledge of structuring – someone else structured the transactions without the defendant’s knowledge

However, a good faith misunderstanding of the law is not a defense if the defendant actually knew about the reporting requirements.

Prosecuting § 5322 Violations

The Department of Justice takes § 5322 violations seriously as part of its efforts to combat money laundering. DOJ policy instructs prosecutors to pursue the most serious provable offense in money laundering cases.

In fiscal year 2019, there were 639 new § 5322 cases filed in U.S. district courts. Common investigations involve unreported cross-border transportation of currency, illegal money services businesses, trade-based money laundering, and more.

The IRS also frequently investigates and refers § 5322 violations for prosecution, particularly cases involving structuring to evade reporting requirements.

Criticisms of § 5322 and BSA Enforcement

Critics argue § 5322 penalties are disproportionate to the underlying reporting offenses. Willfully not filing a report seems innocuous compared to the harm caused by violent crimes.

There are also concerns that structuring laws are enforced unfairly against small business owners, who may structure transactions for reasons other than laundering money.

In response, the IRS has adopted a policy focusing structuring investigations only on cases where the funds seem connected to illegal activity.

Conclusion

31 U.S.C. § 5322 provides an important tool for deterring and punishing money laundering-related activity. However, the severity of its penalties for reporting offenses raises difficult questions about proportionality and fairness. As with any criminal law, careful judgment is required in enforcement to avoid undue harm to well-intentioned citizens.