"Through money laundering, the monetary proceeds derived from criminal activity are transformed into funds with an apparently legal source. Money laundering provides the fuel for drug dealers, terrorists, arms dealers and other criminals to operate and expand their enterprises. We know that criminals manipulate financial systems in the United States and abroad to further a wide range of illicit activities."
Yet, to an ever-increasing extent, ordinary tax-paying, crosswalk-crossing citizens find themselves among those caught in the net meant to snare these more traditional targets of federal criminal investigations.
Take the recent case of Gus and Greta Mueller (names, places, etc., have been changed). Gus worked for years as an IT specialist at a local hospital. With the help of their two adult sons, both patent attorneys, they recently purchased their dream home in Annandale. In order to make the deal work, they needed some extra money for the down payment. Unbeknown to Gus, Greta, a traditional stay-at-home mom, had been saving up portions of the “cookie money” that Gus gave her for household expenses each payday in a secret stash. After forty years, it added up to many thousands of dollars, just enough to make their dream home affordable.
Nice story, isn’t it? Well, it has a scary ending. When Greta told the mortgage broker about the extra cash, the broker advised Greta that if she deposited more than ten thousand dollars at one time, it would be reported to IRS and they would face extra scrutiny from the taxman. So, Greta only deposited $9,900 at a time. Big mistake, since Big Brother, in the form of a federal organized crime task force, was watching.
You see, in order to keep track of potential money laundering operations, the federal government requires banks and other financial institutions and commercial actors to report any transaction involving more than ten thousand dollars in cash or cash equivalents (e.g., cashier’s checks, money orders). And, to prevent mobsters from evading detection of large cash transactions by, say, breaking up $15,000 in cash into three segments and depositing each one in a different bank or branch office, the feds invented a type of money laundering crime called “structuring.”
Structuring is the illegal act of breaking up a larger transaction that would normally have to be recorded or reported into smaller transactions in order to avoid the recordkeeping or reporting requirements. The idea is that money launderers are familiar with the dollar thresholds that require recordkeeping and reporting. Therefore, in order to remain anonymous and avoid the detection of law enforcement agents, they will “structure” their transactions so that the recordkeeping or reporting requirements will not be triggered.
Bank employees are routinely warned to be on the lookout for structuring transactions that might be for the purpose of avoiding these federal recordkeeping or reporting requirements. If they spot activity that might constitute structuring, they are required to send a Suspicious Activity Report (SAR) to the feds. Here is the content of a typical banking notice regarding structuring:
"Likewise, it is illegal for you or your employees to assist anyone in structuring transactions in order to avoid recordkeeping or reporting requirements. For example, you may not tell or even imply to a customer that they can avoid providing information by conducting a smaller transaction. Some criminals may attempt to trick you or your employees into allowing them to structure transactions by splitting up transactions with several accomplices or by trying to 'con' you with a hard luck story. You need to be on the lookout for structuring so that you can prevent it from occurring."
So . . . Gus and Greta’s bank, noticing a series of deposits just under the ten thousand dollar threshold, sent a SAR about them to feds and the task force swooped in. Without any advance warning to Gus and Greta -- and absent the slightest evidence of any underlying criminal activity as the source of the funds – the task force obtained a seizure order from a federal magistrate and confiscated over twenty thousand dollars from Gus and Greta’s bank account. They then visited Gus at his workplace and interrogated him (and later Greta) about these suspicious transactions.
Fortunately, Gus and Greta had the sense and the resources to hire a lawyer with some experience in this area. Ultimately, no criminal charges were brought and much of the seized funds were eventually returned. But the task force got its pound of flesh, Gus and Greta had the scare of a lifetime, thousands of dollars in legal fees were expended, and a great deal of investigative time and effort – time and effort that could have been far better spent chasing actual money launderers with real illicit funds – was wasted treating Gus and Greta like gangsters.
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