Cash structuring, also known as “smurfing,” is a tactic used to avoid suspicion from banking authorities or law enforcement when depositing, withdrawing, or transferring large amounts of money.
It involves structuring money by breaking down a substantial amount of cash into smaller deposits that fall below the reporting threshold (usually $10,000 in the U.S.) set by the Bank Secrecy Act (BSA). The intention is to avoid detection and reporting to the authorities by the financial institutions.
Customers execute cash structuring transactions by splitting up large amounts of cash into smaller, less suspicious transactions. For example, instead of depositing $15,000 at once, a person may choose to deposit $5,000 on three different occasions.
This can be done across multiple banks or accounts to further avoid suspicion. Transactions may also be staggered over time, rather than being performed all at once, to lower the risk of detection.
John Doe runs a small but very profitable home renovation business. He often deals in cash for various transactions, from paying his crew to purchasing supplies. Over a couple of weeks, John accumulates a significant amount of cash from his business—around $30,000.
Rather than depositing this money into his bank account all at once, which would trigger his bank’s reporting threshold and alert the authorities, John decides to execute cash structuring transactions. He goes to his bank and deposits $9,500 into his business account. The following day, he visits a different branch of the same bank and deposits another $9,500 into his personal account.
A couple of days later, John opens a new account at a different bank and deposits $9,500 there. He repeats this pattern over the following weeks, each time keeping his deposits under the $10,000 reporting threshold.
John’s actions constitute cash structuring because he intentionally divides his cash into smaller amounts and staggers the deposits to evade the bank’s reporting requirements. He may not be engaging in money laundering, but structuring transactions in this way is itself illegal and could lead to serious penalties if he were caught.
While structuring is not money laundering in and of itself, it is often used as a tool within larger money laundering schemes. Money laundering involves making illegally-gained proceeds appear legal, often through a series of complex transactions meant to disguise the origin of the funds.
Cash structuring can be part of this process, as it helps to obscure large cash flows that might otherwise attract attention. Structuring is, however, a criminal act in its own right, known as a “structuring violation” under the BSA.
Imagine a situation where an individual, let’s call him Alex, is involved in an illegal drug trade and has amassed significant sums of illicit cash. To legitimize this money, he needs to introduce it into the financial system without raising suspicion.
Alex begins by breaking his large stash of cash into smaller deposits of under $10,000. This is the structuring phase, designed to avoid alerting the banks’ reporting requirements. He deposits these amounts into various bank accounts across different institutions over a period of several weeks.
Once the cash is in the banking system, Alex begins the layering phase. He makes numerous transactions between his various accounts, including purchases, sales, transfers, and withdrawals. This creates a complex web of financial activity that makes tracing the original source of the funds difficult.
Finally, Alex moves into the integration phase. He uses his now “clean” money to invest in legal businesses or buy assets. From the outside, it looks like Alex has legitimate income from his investments or business operations, but the funds’ original source is still the illicit drug trade.
In this example, Alex has used structuring as a tool within his larger money laundering operation. While the structuring itself is a separate crime under the BSA, it forms a part of the money laundering scheme designed to make his illegal proceeds appear legal.
Cash structuring is a serious felony that can result in significant penalties. In the United States, those found guilty of cash structuring can face up to 5 years in prison, and corporations can be fined up to $500,000 per occurrence. The assets involved in the structuring may also be seized by the government.
To prove cash structuring, the prosecution must show that the defendant intentionally structured their transactions to evade bank reporting requirements. This typically involves demonstrating a consistent pattern of deposits, withdrawals, or transfers that fall just below the reporting threshold. The prosecution might use bank records, surveillance footage, witness testimonies, or other evidence to make their case.
Let’s continue the story of John Doe.
One day, an alert bank teller notices John’s repeated deposits of amounts just under $10,000. The teller informs the bank manager, who reviews John’s transaction history and agrees that it seems suspicious. The manager reports the suspicious activity to the bank’s compliance department, which then files a Suspicious Activity Report (SAR) with the Financial Crimes Enforcement Network (FinCEN).
A federal investigator is assigned to the case. They start by reviewing the SAR and then obtain a warrant to further review John’s bank records. They see a clear pattern of deposits just below the $10,000 threshold, conducted across multiple banks and accounts over a period of weeks. They also notice that many of these deposits were made in different branches of the same bank on the same day, further supporting the suspicion of deliberate structuring.
Next, the investigator gathers surveillance footage from the banks, which shows John making the deposits. This not only further corroborates the bank records but also counters any potential claim by John that he was not the person making the deposits.
Finally, the investigator interviews bank employees who interacted with John. They confirm that John was the individual who made the large cash deposits and that he seemed unusually keen on ensuring his transactions were kept below the reporting threshold.
With this combination of bank records, surveillance footage, and witness testimonies, the prosecution builds a compelling case that John intentionally structured his transactions to evade the bank’s reporting requirements, thus demonstrating cash structuring.
The IRS must charge you with tax evasion within 6 years of the alleged violation. However, this is a complex area of law with various exceptions. For example, if a taxpayer is suspected of committing a substantial understatement of income, the IRS may have up to 6 years to bring charges. In cases where there is a willful attempt to evade tax, no such time limit exists.
Tax evasion is a serious crime that carries severe penalties. Convictions can result in up to 5 years in prison, fines of up to $250,000 for individuals and $500,000 for corporations, plus the cost of prosecution. Those convicted also typically have to pay back the taxes they owe, with interest and possible penalties. You should consult with a criminal defense attorney in these situations.
If you’re facing criminal charges for cash structuring, it is essential that you seek the advice of a skilled tax lawyer. These charges are serious and can result in substantial fines and prison time. An attorney will understand the complex laws surrounding cash structuring and can work to build a strong defense on your behalf. They can also help negotiate a plea deal, if appropriate.
Consider using a service like LegalMatch, which connects you with pre-screened, highly qualified attorneys in your area. Remember, it’s crucial to get legal advice as soon as possible if you’re facing such charges. The sooner you act, the more options you’ll have available to defend yourself. Use LegalMatch today to find the right attorney for your case.
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