31 U.S.C. § 5324 – Structuring transactions to evade reporting requirements

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

31 U.S.C. § 5324 is a federal law that prohibits structuring financial transactions to evade reporting requirements. Let’s break down what this law means and why it exists.

What is “Structuring”?

Structuring refers to breaking up large financial transactions into smaller chunks to avoid triggering reporting requirements. For example, U.S. banks must report any cash transaction over $10,000 to the government. If someone wants to avoid this reporting, they might instead make multiple smaller cash deposits under $10,000. This is considered illegal structuring.

Purpose of Anti-Structuring Laws

Laws like 31 U.S.C. § 5324 aim to prevent money laundering and other financial crimes. Reporting requirements help law enforcement detect suspicious activity. Structuring defeats this by keeping transactions under the radar. So anti-structuring laws make it illegal to deliberately evade reporting, even if the money itself is from legitimate sources.

Key Provisions

There are a few key provisions of 31 U.S.C. § 5324:

• It applies to both individuals and organizations.
• It covers transactions involving banks, credit unions, money services businesses, and other financial institutions.
• Structuring cash transactions to evade reporting is illegal, even if the cash is from legal sources.
• Breaking up other types of transactions, like bank wires, to evade any federal reporting rule is also illegal.
• Simply violating the reporting rules, even unintentionally, is not enough – the government must prove the intent to structure.

Penalties

Violating 31 U.S.C. § 5324 can lead to:

• Up to 5 years in prison
• Fines up to $250,000 for individuals, $500,000 for organizations
• Forfeiture of the structured funds

However, penalties are based on the specific circumstances. Many first-time offenders receive probation if they cooperate and pay back taxes.

Recent Controversies

Structuring laws have generated some controversy. Here are two examples:

Over-Criminalization

Some argue anti-structuring laws sweep up innocent conduct. People may structure transactions without realizing it’s illegal [1]. And the government doesn’t have to prove the structured funds came from illegal sources.

Civil Forfeiture

Authorities can seize structured funds through civil forfeiture without charging someone with a crime. There have been cases of the government abusing this power and taking money without evidence of criminal intent [2].

Recent Reforms

There have been some reforms to structuring laws and policies:

• The IRS must now show probable cause of intent to evade reporting before seizing structured funds [3].
• Banks are required to report suspected structuring by customers [4].
• Law enforcement is encouraged to focus anti-structuring efforts only on cases with evidence of criminal activity [5].

Practical Considerations

Here are some dos and don’ts related to structuring laws:

Don’t:

• Break up cash deposits into multiple sub-$10,000 amounts to avoid reporting, without a legitimate reason.
• Hide funds by moving them between accounts or funneling through businesses.
• Lie if questioned about transactions – be upfront about purpose and origin.

Do:

• Consult an attorney if you’re investigated for structuring-related charges.
• Consider an amnesty program to avoid criminal prosecution if you self-report structuring.
• Educate yourself on reporting rules and anti-structuring laws.
• Make sure bookkeeping and cash management processes don’t raise inadvertent red flags.

The bottom line is 31 U.S.C. § 5324 prohibits structuring transactions to evade reporting rules. While well-intentioned, structuring laws have also ensnared innocent conduct in some cases. Understanding the rules and risks is key to staying in compliance.