Texas Law Updates
by Michael Pezzulli
The phrase “Cash is King” evokes warm feelings from most people in the business world. However, anyone engaged in business must understand that failing to follow the rules imposed by the U.S. federal government will create a situation where cash is definitely not king.
How you handle cash 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.
Know the Rules
The U.S. federal government has for some time had on the books the Financial Record Keeping and Reporting of Currency and Foreign Transaction Act of 1970, widely known as the Bank Secrecy Act (BSA). The BSA requires financial institutions in the United States to maintain appropriate records and file certain reports involving currency transactions and customer relationships.
Banks satisfy the BSA primarily with Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). U.S. financial institutions must file a CTR and a Financial Crimes Enforcement Network (FinCEN) Form 104 for every transaction over $10,000.
Just to be clear, a currency transaction is anything involving the physical transfer of currency from one person to another. That means deposits, withdrawals, exchanges, transfers of currency and other payments. Currency is defined as the currency and coin that is accepted as money in the country of issue, whether that is the United States or another country.
Although the law was enacted to detect criminal profits or prevent avoidance of income taxes, the law prohibiting “currency structuring” is not limited only to those involved in criminal activities.
Resist the Urge to Break It Up
This begs the question “Can I break up my currency transactions into multiple, smaller amounts to avoid being reported the government?”
The answer is a resounding NO. The government calls this “structuring.” It is a federal crime to break up transactions into smaller amounts for the purpose of evading the CTR reporting requirement. Doing this may lead to a required disclosure from the financial institution to the government.
To be crystal clear: Structuring transactions to prevent a CTR report can result in imprisonment for up to 5 years and forfeiture of all funds involved in the structuring transactions.
Take, for example, the case of a North Carolina criminal attorney, Johnny S. Gaskins.
Gaskins was indicted for making 38 deposits ranging from $2,700 to $9,980 over two and a half years. He was convicted of seven felony counts of structuring financial transactions with banks for the purpose of evading federal reporting requirements. Gaskins was not only convicted of felony charges, he was also suspended from the practice of law for a minimum of two years, or for the entire length of time he was on supervised release pursuant to the criminal judgment, whichever was longer.
There was no evidence that the cash received by Mr. Gaskins was structured to avoid income taxes; or that the cash was from any criminal activity; or that he did not fully pay his federal income taxes. Gaskins was still convicted and suspended.
We will discuss more criminal activities that you may not even be aware of in an upcoming article. However, there is little doubt that if you engage in currency structuring transactions, you may well be at risk of spending time in a federal prison.
1. The origin of “cash is king” is not clear. It was used in 1988 after the global stock market crash in 1987 by Pehr G. Gyllenhammar, who at the time was the CEO of Volvo.
2. 31 U.S.C. § 5311 et. Seq.
3. Formally known as Internal Revenue Service [IRS} Form 4789
4. 31 U.S.C. § 5324 (d)(1)
5. 31 U.S,C. § 5317(c)(2).
6. The North Carolina State Bar v. Johnny S. Gaskins, attorney, Before the Disciplinary Hearing Commission of the North Carolina State Bar, 09 DHC 30, December 30, 2010. See: http://www.ncbar.gov/orders/gaskins%20johnny%20order%20of%20discipline%20ocr.pdf