Anti-structuring in the news!

|The Volokh Conspiracy |

One of the more obscure, and strangest, provisions in the federal criminal code—the "anti-structuring" provisions in 31 USC 5324—is much in the news these days.

"No person shall, for the purpose of evading [the requirement that banks and other financial institutions must report all cash transactions over $10,000], structure or assist in structuring …any transaction with one or more domestic financial institutions."

Denny Hastert has been charged with structuring cash transactions for this very purpose (evading the banks' reporting requirements) by breaking down transactions into chunks under $10K (and of lying to the FBI about it). And two of the defendants in the growing FIFA scandal—Daryll and Daryan Warner, sons of former FIFA vice-president (and a former Prime Minister, and Minister of National Security, of Trinidad) Jack Warner—apparently pled guilty to a structuring charge (and have subsequently been providing evidence to the prosecutors).

Here's what is so strange about the anti-structuring law. A little history will help. In 1993, the Supreme Court decided the case of Ratzlaf v. US (510 US 135 (1994)). Ratzlaf, the defendant, owed $100,000 to a Las Vegas casino; he expressed concern, to a casino officer, about having a report of the transaction reach the Treasury Dep't, and the casino helpfully provided a limousine to take him around to a number of local banks where he could get a bunch of cashiers' checks for $9,900 to pay off the debt.

The anti-structuring statute at the time called for proof that the defendant had "willfully violate[d]" the anti-structuring provision. The Court (with Justice Ginsburg writing for the majority of five) held that the government had not proved that Ratzlaf acted with the requisite "willfulness."

(Law students take note—Ratzlaf is a very interesting decision about how to construe the word "willful" when it appears, as it does not infrequently, in statutory criminal provisions. And an odd lineup, which usually means something interesting was going on in the case: Ginsburg joined by Stevens, Scalia, Souter, and Kennedy in the majority; Blackmun, Rehnquist, O'Connor, and Thomas in dissent).

The Court noted that "willfully," when used in federal statutes, usually means that the actor had "specific intent to commit a crime"—a "purpose to disobey the law"—i.e., that the defendant knew that he was acting unlawfully but went ahead nonetheless. It's the legislature's way of overriding the usual rule that "ignorance of the law is no excuse"; ignorance of the law is an excuse, if the statute requires the government to show that you acted "willfully."

Ratzlaff, the Court held, didn't act "willfully," because even though he knew of the bank's reporting requirement (and was acting with the purpose of evading that requirement), he didn't know that such evasion was itself a crime, and without that knowledge he could not be said to have acted with a "specific purpose to disobey the law." Or to put it differently—he knew that breaking up his transaction meant that the banks wouldn't have to report any part of it to Treasury; but he didn't know (or at least the government hadn't proved that he knew) that it was illegal to do so.

The government argued because "structuring is not the kind of activity that an ordinary person would engage in innocently," it was therefore "reasonable to hold a structurer responsible for evading the reporting requirements without the need to prove specific knowledge that such evasion is unlawful." The Court (wisely, in my view) rejected that argument:

"Undoubtedly there are bad men who attempt to elude official reporting requirements in order to hide from Government inspectors such criminal activity as laundering drug money or tax evasion. But currency structuring is not inevitably nefarious. Consider, for example, the small business operator who knows that reports filed under 31 U.S.C. § 5313(a) are available to the Internal Revenue Service. To reduce the risk of an IRS audit, she brings $ 9,500 in cash to the bank twice each week, in lieu of transporting over $ 10,000 once each week. That person, if the United States is right, has committed a criminal offense, because she structured cash transactions "for the specific purpose of depriving the Government of the information that Section 5313(a) is designed to obtain." Nor is a person who structures a currency transaction invariably motivated by a desire to keep the Government in the dark. But under the Government's construction an individual would commit a felony against the United States by making cash deposits in small doses, fearful that the bank's reports would increase the likelihood of burglary, or in an endeavor to keep a former spouse unaware of his wealth."

Unfortunately, Congress, responding to alarms that this holding would make it harder to find and to prosecute money launderers and drug dealers, rather quickly responded by deleting the word "willfully" from the statute, leaving us with the statute we now have, in which all they have to prove is knowledge that the banks have to report transactions over $10k, and the purpose to evade that reporting requirement.

And here's what is odd and troublesome about that. We're all subject to any number of laws that require us to report things to the government (and that will punish us, sometimes criminally, if we fail to do so). Tax laws require that we report income-generating activities, and securities laws require us to disclose efforts to put our securities up for sale, election law requires us to disclose certain political contributions to the FEC, etc.

But the anti-structuring statute doesn't just require us (or the banks) to provide information to the government about events that have occurred; instead, it requires us to create the reportable information, for the government's information-gathering benefit. That is, when Denny Hastert walks into the bank and withdraws $9,900, the event that the statute is designed to track—transactions of more than $10K—hasn't occurred. There is, therefore, nothing for the bank to report. The statute, though, makes it a crime for him to make the withdrawal in a way that doesn't trigger the report to the government. It requires him, in other words, to act in a way that makes the reportable event happen (and that simultaneously will alert the government about it). [And then it can seize all of the money involved in the transaction!]

Hastert, it seems clear (at least from the indictment), was hiding something, and he didn't want the government to know about whatever it was he was hiding. The government has not charged that whatever he was hiding was illegal or criminal—only that he hindered their efforts to find out about whatever it was that he didn't want them to find out about—by structuring his transactions to evade the reporting requirement, and by lying about his reasons for doing so to prosecutors.

It's yet another example of that most disturbing trend: high profile defendants (Barry Bonds, Scooter Libby, Martha Stewart, and many others) who don't end up being charged with any underlying offense, but rather with hindering, in some way, the government's investigation into whether or not an underlying offense ever occurred. It smells like prosecutorial overreach, to me.