This post was originally published on Forbes Jun 4, 2015
The supporters of embattled young earth creationist Kent Hovind have been hoping that the troubles of Dennis Hastert with the crime of structuring might elicit more sympathy for Doctor Dino, as Kent Hovind is known. Hovind is nearing the end of a long sentence, that based on the number of counts was mainly about structuring. Instead the other name that I am hearing is Eliot Spitzer. Apparently Spitzer’s scandal which involved prostitutes was triggered by a bank’s suspicious activity reports, although in the end Spitzer was not prosecuted. I decided to talk to a couple of people who know about structuring. Here is the biggest takeaway. Structuring is a crime under federal law, but it is the type of crime, that you could commit kind of innocently. It is something of a cautionary tale.
I spoke with two people who educated me some more on structuring. Up till now my primary education has been listening to Kent Hovind say that it is a stupid law, that Congress should repeal. Barry Sziklay is a valuation and litigation support partner at Friedman LLP, one of the largest accounting firms in the metro New York area. Barry pointed me to www.fincen.gov, which explains the Suspicious Activity Reports that are probably the source of Mr. Hastert’s most recent troubles. Barry put a bit of a damper on my emerging theory that this is long delayed payback for Hastert’s role in MonicaGate. The amount of money, nearly a million, and the number of transactions, over a hundred, were bound to generate enough suspicious reports to get some attention.
Next I spoke to Ellen Zimiles, a managing director with Navigant Consulting. She heads up Navigant’s Global Investigations and Compliance practice. Navigant bought the consulting practice that Ellen had founded after her stint at KPMG, but the really interesting job that she held was Assistant United States Attorney in the Southern District of New York. Like Barry, Ellen mentioned Eliot Spitzer as someone who was tripped up by suspicious activity reports.
She then explained to me with infinite patience the crime of structuring. Since the seventies banks and some other institutions have had to file reports on cash transactions in excess of $10,000. There is nothing illegal about having as much cash as you want. There is just going to be all these reports filed, which somebody might look at and call on you and ask you questions.
Of course even if you are not doing anything illegal, those type of inquiries could be annoying and besides whose business is it that you are dealing in cash, if what you are doing is legitimate. That was Kent Hovind’s attitude anyway. Pastor Mooneyhan who was providing an umbrella for Kent Hovind’s Creation Science Evangelism told him to try to keep his withdrawals under $10,000 to avoid the reports being filed. Which is a crime. The crime is not keeping the withdrawals under $10,000.
That intent thing is very important. If you have some other reason for keeping your deposits and withdrawals under $10,000, then you are not committing the crime of structuring. Ms. Zimiles gave me an example from her US attorney days of a fellow who owned a record store and had a penchant for deposits in the $9,000 range. He explained to her that his insurance only covered cash amounts of up to $10,000. So he never wanted to have more than $10,000 on hand. After checking out the insurance story, she moved on to fight crime elsewhere.
So structuring is a counterproductive activity. It may get you into more trouble than whatever you were trying to hide. The other charge against Dennis Hastert is lying to the FBI. That is another dumb thing to do and also a crime. As Ms. Zimiles puts it “The truth will never be worse than the coverup”.
Ms. Zimiles filled me in a little more on the bank secrecy laws, which she indicates are really misnamed, since they are more about disclosure than secrecy. There is a team with members from different agencies such as the FBI and the IRS who examine the suspicious activity reports. In each district there is someone in charge who is called the SAR Czar. I thought that was pretty clever. She also said that there is a provision to allow businesses, like large grocery stores, that routinely deal in large amounts of cash to be exempt from reporting.
Interestingly, the threshold for currency reporting ($10,000) has not changed since the seventies. I asked Ms. Zimiles about that and she said that raising the number has been discussed many times, but there is never any consensus as to what the new number should be, so it remains $10,000. It’s funny because I remember in the seventies not having a credit card at all and feeling that if I had eight dollars in my wallet, I was ready for anything. On the other hand, people tended to routinely deal in cash a lot more back then. I was a hotel night auditor and I handled a lot of twenties and hardly any hundreds and nowadays I still don’t have any call for hundreds, but I am using my credit card in pizza shops.
It would seem that the suspicious activity reports serve the same function as the currency reporting for larger deposits and withdrawals. Somebody who thought they were being clever by keeping things a bit below $10,000 has not really gotten away with anything. Of course, it is easier to convict them of structuring than whatever their structuring was intended to obscure. Like the way Al Capone was convicted of income tax evasion, people who are evading income taxes or dealing in drugs can be convicted of structuring, since it is relatively easy to prove. Given that it is something that can be done otherwise innocently, though, it may put too much power in the hands of prosecutors.