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Structuring Financial Transactions

While the crime can take many different forms, it is not something you want to be accused of, and if you are, it will be critical to have an attorney skilled in structuring law.

One common white-collar crime is the structuring of financial transactions. When this happens, a person or business deposits money in an intentional manner that allows them to avoid banking requirements surrounding reporting financial transactions. This is often a tactic for tax evasion, as the smaller sums do not have to be disclosed to the government in the same way a lump sum would. Anyone convicted of structuring, or money laundering, is subject to serious fines and penalties at the federal level.

What Is Structuring?

The laws around structuring are defined in Federal Statute 31 USC 5324, which states that no person shall, for the purpose of avoiding a financial transaction reporting requirement, cause or attempt to cause a domestic financial institution or nonfinancial trade or business to fail to file a required financial report.

The 11th Circuit Court Criminal Jury Instructions further says that to structure “a transaction means to deposit, withdraw, or otherwise participate in transferring a total of more than $10,000 in cash or currency using a financial institution or bank by intentionally setting up or arranging a series of separate transactions, each one involving less than $10,000, in order to evade the currency reporting requirement that would have applied if fewer transactions had been made.”

The passage of the USA Patriot Act has given law enforcement agencies broader powers to investigate, indict, and convict terrorists. In the name of this goal, federal agencies are able to obtain business and bank records. Financial institutions are also required to aggregate transactions from countries known for laundering money.

This leaves a large amount of data to go through- in 2019 alone, over 20 million currency transaction reports were filed for review. These reports, known as CTRs, are required by regulators under the Bank Secrecy Act and apply to any transaction over $10,000. When multiple reports are filed for the same taxable entity, an investigation is often opened.

What About Money Laundering?

Money laundering and structuring are similar crimes that are often associated, though they are not the same charge. Money laundering is the act of concealing the movement of large amounts of money, often generated via illegal activities like drug trafficking and terrorist activity. The concealment is often done in such a way that this money, obtained in a “dirty” way, now looks clean. This results in something called placement, in which the “dirty” money is introduced into the wider financial system.

Layering refers to concealing the source of the funds via complex transactions and bookkeeping tricks, which is where structuring of the transactions often takes place.

Structuring Charges

Federal law recognizes several categories of structuring crimes. Each case may involve one, multiple, or all of these forms. The types of structuring can include:

  • Causing or attempting to cause a domestic financial institution, such as a bank or credit union, to fail to file a report required by law.
  • Causing or attempting to cause a financial institution as defined above to file a required report with a material omission or misstatement of fact.
  • Structuring or assisting in structuring one or more financial transactions with any domestic financial institution or institutions.
  • Engaging in any of the above-defined activities related to financial reporting as related to nonfinancial businesses or trades. For example, causing a nonfinancial trade or business to fail to file a report or to file an inaccurate report.
  • Failing to file a report, or causing a report to be unfiled or to include material omissions or misstatements, when the report relates to the importation or exportation of money, or structuring any transaction related to such importation or exportation.

While some crimes can be charged at the state level, structuring generally is investigated by federal agencies and is prosecuted in federal court.

Penalties for Structuring

Title 18 of the United States Code outlines fines in cases of structuring, but in many cases, it can lead to time in prison. Most cases will not involve prison time exceeding five years, but the circumstances can play a role, and serious criminal activity may lead to longer sentences. For example, violating a structuring law while simultaneously violating other laws and involving over $100,000 in a 12-month period is eligible for ten years imprisonment and a doubled fine.

The statute of limitations on structuring is five years. If the defendant is not indicted within five years of the alleged offense, the government cannot pursue the case in any form.

Structuring Cases

Most prosecutions for structuring are not high-profile crimes, but there are many cases where wrongdoing is uncovered.

Danny Pang, the founder and former chief executive officer of PEMGroup, was arrested in 2009. He had allegedly been using employees of the $700 million financial services company to make transactions of $9,000 each in order to avoid reporting requirements. He was confined to his home on house arrest pending trial but died before he was convicted.

Defense for Structuring Accusations

Like any other crime in the United States, anyone accused of structuring will have the chance to defend their case in court and prove their innocence. In order to do so effectively, it’s crucial to retain an attorney who understands finance law well and is able to create a case.

The prosecution’s burden will be to prove that a defendant not only completed these transactions, but also did so knowingly and with the intention of avoiding transaction reporting requirements. Let’s say you have been given $50,000 in the form of 6 checks. Each check was drawn on different accounts from a payor, and you deposit the checks to your account. This meets the standards for structuring, but it’s possible you were simply depositing the funds as you received them and not attempting to structure the transactions. Because it was not intentional, it could be argued that you are not guilty of structuring. Had you requested the checks be written in that form, it may be more likely you are found guilty.

Another common defense is the scenario where smaller deposits are made from a large pool of available money. There may be a fear of transporting large amounts of cash, leading to precautions such as smaller deposits over the course of time. If the intention is not to structure, or you are unaware of the laws, this could be a viable defense. Some banks also have limits on individual deposit amounts that could make this necessary. However, the more deposits, the less likely it is that this defense is viable.

If you’ve been charged with structuring or another white-collar financial crime, it is critical you find representation who is familiar with these laws and can help you craft a defense in court. Doing so can help you avoid fines, jail time, and reputational risk that may come with a conviction of structuring in federal court. Federal investigations can be lengthy and involved, and the more proactively you are able to address allegations, the better your chances are of acquittal.

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