Civil Asset Forfeiture

DOJ Introduces New Restrictions on Asset Forfeiture That May Help Small Businesses

Absent other criminal charges, they won't go after those suspected of 'structured' deposits.


Safe to deposit … maybe? |||
Credit: Philip Taylor PT / photo on flickr

This afternoon the Department of Justice (DOJ) announced a new policy restraining asset forfeiture that could potentially be a boon to small businesses previously been swept up in some really terrible IRS investigations. Attorney General Eric Holder has ordered higher thresholds for a particular type of asset forfeiture that has gotten both the DOJ and the IRS some very bad publicity. They've been going after small, cash-centered businesses because their manner of operations mimics behavior by people trying to avoid having report financial deposits, even though don't appear to be trying to do anything illicit. From the DOJ's press release this afternoon:

As part of the Department of Justice's comprehensive, ongoing review of the asset forfeiture program, Attorney General Eric Holder today issued a policy focusing the use of asset forfeiture authorities on the most serious illegal banking transactions, restricting civil or criminal forfeiture seizures for structuring until after a defendant has been criminally charged or has been found to have engaged in additional criminal activity, in most cases.

"With this new policy, the Department of Justice is taking action to ensure that we are allocating our resources to address the most serious offenses," said Attorney General Holder.  "Appropriate use of asset forfeiture law allows the Justice Department to safeguard the integrity, security and stability of our nation's financial system while protecting the civil liberties of all Americans.  And as we continue our comprehensive review of the Asset Forfeiture Program, we will stay focused on deterring criminal activity, assisting victims of wrongdoing and defending the rights of our citizens."

Structuring generally occurs when, instead of conducting a single transaction in currency in an amount that would require a report to be filed or record made by a domestic financial institution, the violator conducts a series of currency transactions, willfully keeping each individual transaction at an amount below applicable thresholds to evade reporting or recording.  In addition to being a stand-alone offense, structuring is a crime that often occurs in connection with other criminal activity.

Under the new policy, in the absence of criminal charges, judicially authorized warrants to seize bank accounts involved in structuring can only be obtained if the prosecutor first develops probable cause of additional federal criminal activity and that determination is approved by a supervisor.  Otherwise, a prosecutor may ask a judge to issue a seizure warrant only if either the U.S. Attorney or the Chief of the Criminal Division's Asset Forfeiture and Money Laundering Section personally determines that seizure would serve a compelling law enforcement interest.

Jacob Sullum has made note at Reason of the many businesses being harmed by this behavior. In New York, U.S. Attorney Loretta Lynch (currently nominated to replace retiring Holder) oversaw the seizure and holding of $475,000 from a family-operated distribution business and sat on it for three years. The business was never actually charged with a crime and finally got the money back after the Institute for Justice got involved. There have been similar cases in Iowa and Michigan.

The new policy also requires prosecutors actually file criminal or civil complaint against their targets within 150 days or return the money.

The basics look helpful, but there appear to be a lot of exceptions that could potentially allow prosecutors to push forward anyway. My biggest worry is that requiring criminal charges would actually incentivize prosecutors to look for reasons to actually put these people behind bars as well, rather than just trying to snatch all their money. Sullum has previously noted that the IRS had allegedly reformed its guidelines for going after people solely for the act of structured deposits unless there were "exceptional circumstances," and yet they're still at it. The incentives are still there for the Department of Justice to seize money. That hasn't changed.