Structuring

Structuring is the legal term to describe the issue of transactions structured to avoid certain record keeping and reporting requirements mandated by law, such as the United States's Bank Secrecy Act (BSA) and/or 26 USC 6050I (Form 8300). [cite book | author=Internal Revenue Service | chapter=Part IV Examining Process; Chapter 26 Bank Secrecy Act; Section 13 Structuring | title=Internal Revenue Manual | location=Washington, D.C. | publisher=US Treasury Department | url=http://www.irs.gov/irm/index.html | chapterurl=http://www.irs.gov/irm/part4/ch25s17.html | year=2006-06-01 | oclc=37305546 | accessdate=2008-03-11]

Background

Sometimes referenced as smurfing in banking industry jargon, structuring includes the act of parceling large financial transactions into smaller transactions to avoid scrutiny by regulators or law enforcement. Structuring often appears in federal indictments related to money laundering, fraud, and other financial crimes. The term "smurfing" is derived from the image of the cartoon characters, The Smurfs, having a large group of many small entities. The coining of the term is attributed to Miami-based lawyer Gregory Baldwin in the 1980s. [cite news | author=Gross, Samantha; Barrett, Devlin | title=Spitzer Tripped Up on Laws He Enforced | url=http://www.foxnews.com/wires/2008Mar11/0,4670,SpitzerTheMoneyTrail,00.html | work=Fox News | date=11 March 2008 | accessdate=2008-03-14]

Typically each of the smaller transaction is below some statutory limit, that does not require a financial institution to file a report with a government agency. Criminal enterprises often employ several agents (smurfs) to make the transaction. However, even business practices can cause scrutiny with dire results, as detailed recently by an article in Forbes magazine. [cite news | author=Novack, Janet | title=My Big Fat IRS case | url=http://www.forbes.com/business/forbes/2008/0407/038.html | work=Forbes | date=7 April 2008 | accessdate=2008-03-30] The article reports that even if "the money is from a legal source, the government can charge you with a crime and/or demand you forfeit case" if you apply the structuring method knowingly.

The term is also applied to activity associated with controlled substances such as pseudoephedrine. In this context the agent will make purchases of small, legal amounts from several drug and grocery stores intent to aggregate the lot for use in the illegal production of methamphetamine.

United States practice

In the United States, the Bank Secrecy Act requires the filing of a currency transaction report (CTR) for transactions of US$10,000.01 or more. Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a suspicious activity report.

Title 31 of the United States Code, section 5324, provides (in part):

No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—

[...]

(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.

Section 5324 further provides that a violation of this provision may be punished by a fine or up to five years in prison, or both. [usc|31|5324(d)(1).]

Regulatory Table

ee also

Smurf

References

External links

* [http://www.fincen.gov/fincenruling2005-6.pdf Financial Crimes Enforcement Network ruling on structuring]