Under federal laws, certain kinds of financial transactions must be reported by banks to the federal government. Although banks bear the ultimate responsibility for reporting these transactions appropriately, individuals may choose to “structure” their transactions in such a way that they will be able to dodge these reporting requirements.
For example, although banks are required to report most transactions of $10,000 or more, no such reporting requirement exists for a transaction of $9,000. Federal structuring charges arise when someone has demonstrated a pattern of behavior suggesting that they are actively trying to avoid these reporting requirements.
Structuring is often considered to be a sign that someone might be engaging in illegal tax evasion, as distinct from lawful tax avoidance. As a result, those who are charged with structuring under federal law are at enhanced risk of being selected for an IRS audit.
Structuring Laws
Although some states have enhanced reporting requirements for certain kinds of transactions, most structuring laws exist at the federal level. Structuring laws can change over time as the federal expectations evolve, and people who actively wish to avoid charges of structuring should coordinate with their banks in order to understand the requirements of those laws.
Structuring Crimes & Charges
Federal structuring laws recognize several different categories of structuring crimes. A case of structuring can involve one, several, or all of the following structuring charges that are defined under 31 USC § 5324 of the United States federal codes:
- Causing or attempting to cause a domestic financial institution, such as a bank or credit union, to fail to file a report required by Section 21 of the Federal Deposit Insurance Act or Section 123 of Public Law 91-508.
- Causing or attempting to cause a financial institution as defined above to file a required report with a material omission or misstatement of fact.
- Structure or assist in structuring one or more financial transactions with any domestic financial institution or institutions.
- Engage in any of the above defined activities related to required financial reporting as it relates to nonfinancial businesses or trades; for example, cause a nonfinancial trade or business to fail to file a report or to file an inaccurate report.
- Fail to file a report, or cause a report to be unfiled or to include material omissions or misstatements, when such a report has to do with the importation or exportation of money, or structure any transaction related to such importation or exportation.
Structuring Punishment
Title 18 of the United States Code provides for fines in the cases of structuring, but prison time is also possible. Generally speaking, imprisonment for structuring cannot exceed five years. However, the circumstances of the case also play a role.
Structuring Sentencing Guidelines
Structuring sentences are limited to no more than five years in prison in most cases. However, some aggravated cases may qualify for enhanced sentencing. Violating structuring laws while engaged in a pattern of behavior that includes the violation of other U.S. laws, involving more than $100,000 in a 12-month period, can result in imprisonment of up to ten years and a doubled fine.
Structuring Statute of Limitations
The federal statute of limitations on noncapital offenses, defined in title 18 of the US code, section 3282, is five years; if the defendant is not indicted and information is not entered within five years of the alleged offense, the government cannot prosecute, bring the case to trial, or seek any punishment. As structuring is usually not connected with any capital offense, it can be reasonably expected that these limitations will stand in most cases.
Structuring Cases
Federal structuring cases rarely make the news, or do so in connection with other white collar criminal activities. However, there have been cases where major examples of criminal wrongdoing have been uncovered on the basis of structuring charges:
- Danny Pang, founder and former chief executive of California’s $700 million financial services company PEMGroup, was arrested in 2009 for allegedly using his company’s employees to make transactions of $9,000 and evade federal reporting requirements. (Department of Justice Pressroom)
- In 2008, preliminary investigations into the alleged criminal activity of New York Governor Eliot Spitzer focused on areas including structuring and money laundering. However, charges were ultimately dropped. (Slate: How to Prosecute Eliot Spitzer)
Structuring Quick Links & References
- Overview of Structuring Laws and Charges at Cornell University Law School Database
- Internal Revenue Service Manual on Structuring and Related Charges
- Understanding the Evasion of Federal Reporting Requirements and Who Does It
- Dividing Deposits Can Be a Federal Crime – Report from Tennessee Bar Association
- Significant Circuit Court Ruling Clarifies How Structuring Charges Should Work
- The Federal Deposit Insurance Act Defining Structuring Related Reporting Needs
Structuring Laws by State
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming