by Michael Pezzulli
The phrase “Cash is King” does tend to evoke 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 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 federal government has for some time had on the books the Financial Record Keeping and Reporting of Currency and Foreign Transaction Act of 1970 which is widely known as the Bank Secrecy Act (“BSA”). The purpose of the BSA is to require United States financial institutions to maintain appropriate records and file certain reports involving currency transactions and a financial institutions customer relationships.
The banks satisfy the BSA primarily by using what are called Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). U.S. financial institutions must file a CTR, Financial Crimes Enforcement Network (FinCEN) Form 104 for each transaction over $10,000.
Just so we are clear, a currency transaction is any transaction involving the physical transfer of currency from one person to another and covers deposits, withdrawals, exchanges, or transfers of currency or other payments. Currency is defined as currency and coin of the United States or any other country as long as it is customarily accepted as money in the country of issue.
Although 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.
Resist the Urge to Break It Up
All of 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.” Federal law makes it a crime to break up transactions into smaller amounts for the purpose of evading the CTR reporting requirement and this may lead to a required disclosure from the financial institution to the government.
Just so we are all clear, structuring transactions to prevent a CTR from being reported can result in imprisonment for up to five (5) years and the convicted party may well be subjected to a forfeiture of all money involved in the structuring transactions.
Take, for example, the case of criminal attorney, Johnny S. Gaskins. Mr. Gaskins was indicted for making 38 deposits ranging from $2,700 to $9,980 over a period of 2 ½ years. He was convicted of seven felony counts of structuring financial transactions with banks for the purpose of evading the reporting requirements outlined above. Not only was he convicted of seven felony counts, he was 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, no evidence that the cash received was from any criminal activity and there was no evidence that Mr. Gaskins did not fully pay his federal income taxes. He was still convicted and suspended.
We will discuss more criminal activities that you may not even be aware of in the next newsletter; however, there is little doubt that if you are engaging in currency structuring transactions you may well be spending time in a federal prison.
1. 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