Title 31 U.S. Code 5324 - Structuring Transactions to Evade Reporting Requirements
In the United States, financial institutions and other businesses are required by law to report to the government all cash transactions in excess of $10,000.
If you attempt to structure a transaction to evade this requirement, it violates federal law under Title 31 U.S. Code 5324. You could face up to 5 years in prison if convicted of this crime.
31 U.S.C. 5324 says, “(a) Domestic Coin and Currency Transactions Involving Financial Institutions. No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act.”
Subsection (1) says it's a crime to cause or attempt to cause a domestic financial institution to fail to file a report under any required regulation.
Subsection (2) says it's a federal crime to cause or attempt to cause a domestic financial institution to file a report under any required regulation that contains a material omission or misstatement of fact; or (3) structure or assist in structuring any transaction with one or more domestic financial institutions. Let's review this federal law further below.
What Is Structuring?
Under the law, banks must file a Currency Transaction Report (CTR) for all cash deposits of $10,000 or more.
Similarly, any non-financial trade or business that receives a cash payment of $10,000 or more must report that specific payment to the IRS by filing Form 8300.
Illegally "structuring" a transaction means setting up (structuring) a large cash transaction so that it doesn't trigger the reporting requirements.
The most common method for doing this is called “smurfing,” breaking up a large cash deposit into a series of smaller deposits to avoid bank detection.
What Does the Law Say?
Title 31 U.S.C. 5324 makes it a federal crime for any person or entity to knowingly structure or attempt to structure any transaction with the intent to evade reporting requirements. It specifically addresses the following practices:
- Structuring a transaction with a financial institution so a required report is not filed;
- Structuring a transaction in a way that the financial institution files a report that contains "an omission or misstatement of fact;"
- Structuring, or assisting in structuring, a transaction between more than one financial institution so that neither institution reports it;
- Doing any of the above with a non-financial trade or business, such as making multiple smaller transactions, causing an erroneous report, or spreading a transaction between companies to evade reporting.
What Are Some Examples?
EXAMPLE 1: Bob generates $20,000 in cash sales at his flea market booth. To conceal from the government the fact that he made this cash, he breaks this amount into three separate deposits at his bank: two deposits of $7000 each and one deposit of $6000.
Bob can be charged under 31 U.S.C. 5324 because he effectively disguised his large cash deposit by making a series of smaller ones.
EXAMPLE 2: The same scenario, except Bob, makes his three deposits at three different banks. Bob can be charged with illegal structuring because none of the three banks will recognize the transaction as reportable.
EXAMPLE 3: Arnie does some remodeling work for his friend, Jack, for which Jack will pay $12,000 in cash. To hide this income from the IRS, Arnie asks Jack to pay him three cash payments of $4000 each over three days, so he doesn't have to file Form 8300. Jack agrees.
Both Arnie and Jack could be charged under Title 31 U.S.C. 5324—Jack for structuring the transaction, and Arnie, for assisting.
What Are the Related Federal Statutes?
31 U.S. Code Chapter 53, monetary transactions, Subchapter II, records and reports on monetary instrument transactions, has numerous federal statutes that are related to 31 U.S.C. 5324, structuring transactions to evade reporting requirement prohibited, including the following:
- 31 U.S.C. 5311 – declaration of purpose;
- 31 U.S.C. 5312 - definitions and application;
- 31 U.S.C. 5313 - reports on domestic coins and currency;
- 31 U.S.C. 5314 - records on foreign financial transactions;
- 31 U.S.C. 5315 - reports on foreign currency transactions;
- 31 U.S.C. 5316 – reports on exporting and importing;
- 31 U.S.C. 5317 - search and forfeiture of monetary instruments;
- 31 U.S.C. 5318 - compliance, exemptions, and summons authority;
- 31 U.S.C. 5318A - special measures for jurisdictions;
- 31 U.S.C. 5319 - availability of reports;
- 31 U.S.C. 5320 - injunctions;
- 31 U.S.C. 5321 - civil penalties;
- 31 U.S.C. 5322 - criminal penalties;
- 31 U.S.C. 5323 - whistleblower incentives and protections;
- 31 U.S.C. 5325 – id required to purchase monetary instruments;
- 31 U.S.C. 5326 - records of certain domestic transactions;
- 31 U.S.C. 5329 - staff commentaries;
- 31 U.S.C. 5330 - registration of money transmitting businesses;
- 31 U.S.C. 5331 - reports on nonfinancial trade or business;
- 31 U.S.C. 5332 - bulk cash smuggling in or out of the U.S.;
- 31 U.S.C. 5333 - safe harbor to keep open directives;
- 31 U.S.C. 5334 - anti-money laundering and terrorism;
- 31 U.S.C. 5335 - concealment of the source of assets;
- 31 U.S.C. 5336 - ownership reporting requirements.
What Are the Penalties for 31 U.S.C. 5324?
If you're charged with structuring a transaction to evade reporting requirements, you could face significant penalties if convicted. These include:
- Fines up to $250,000 or $500,000 for organizations;
- Up to five years in federal prison; or
- In some cases, the forfeiture of any assets that the government can connect with the crime.
Suppose you are convicted of this crime as part of an ongoing pattern of illegal activity involving more than $100,000 in 12 months. In that case, you face an enhanced penalty of double the fine and double the prison time.
What Are the Defenses for 31 U.S.C. 5324?
As with many other types of crimes, federal prosecutors must establish that you intended to evade the reporting requirements with your actions—and intention is often challenging to prove.
Thus, the most common defense strategy for structuring-related charges is to argue that your actions were not done with the specific intent to evade reporting requirements or to prove that they had a "legitimate" reason for breaking up the transaction.
Perhaps we can argue that you were paying in installments and deposited the money as you received it.
Perhaps we can argue that you might have written multiple checks from multiple bank accounts to cover the total amount of your payment, and you deposited them together.
Perhaps we can argue that you may have made separate smaller cash deposits in consecutive days because of the crime rate in your neighborhood because you were concerned about a robbery and didn't want to carry large amounts of cash.
Perhaps negotiation with the federal prosecutor to work out a favorable plea bargain. If you want to review your case's details and legal options, contact our law firm via phone or use the contact form.
The federal criminal defense lawyers at Eisner Gorin LLP offer legal representation across the United States. We are located in Los Angeles, California.