Seeking financial privacy in cash transactions in the United States is now a crime punishable with up to 5 years in Federal prison. Think I’m exaggerating? I personally know individuals locked in cages for this, and only this, crime.
Here’s how this attack on your financial privacy works:
Several years ago, the U.S. Government passed laws requiring banks to report any cash deposits or withdrawals over $10,000. As is the case with all laws sold to the American people, this one came with high ideals and lofty goals: to stop terrorists and drug dealers. Who could object to that?
- CTRs and STRs are sent to the IRS and U.S. Treasury without your knowledge. You have no right to receive notice or a copy of the form.
Of course, both honest and not so honest people with reasons to do business in cash, don’t want their banks sending in these forms (called Currency Transaction Reports, or CTRs), and look for ways around them. The most obvious method is to deposit or withdraw less than $10,000. Need to transact more than $10,000? Use different banks or the same bank on different days.
- This attack on financial privacy goes after cash transactions. Checks and wire transactions are easy to track and are not included in these rules.
Not to be out maneuvered, the U.S. passed laws making it a crime to take steps to avoid the CTR. They also required banks to report any suspicious activity using a Suspicious Transaction Report, or STR. Show up at your bank four days in a row with $6,000, you’ll get an STR. Deposit $8,000 and ask about the bank’s CTR policy and you’ll get an STR. Both CTRs and STRs are added to your IRS transcript, just like 1099s, W-2s, etc. The CTR significantly increases your change of an IRS audit, while the STR basically guarantees you a visit from a government agent.
The “crime” you are committing by attempting to avoid the CTR, and reduce your chance of an IRS audit, is called structuring. If you structure your cash transactions in an attempt to maintain any level of financial privacy, you may be looking at a fine of $100,000+ and up to 5 years in prison.
Note that I said these rules have been around for several years. In the past, they were used against their intended targets, drug dealers and money launderers, to increase their sentences. For example, a drug dealer is caught selling on the corner and depositing $9,000 every other day in his various bank accounts. He might be offered a plea with 8 years for selling and 2 years for structuring. His attorney may negotiate the total time down to 8 years by talking the prosecutors out of the structuring charge.
These days the IRS is turning its weapons (CTRs and STRs) on average citizens. I’ve seen bar and restaurant owners, small/private ATM providers, lawyers, and people investing in gold and gold coins, all caught up in a battle for their freedom with the U.S. Government. These attacks on personal financial privacy are real and being fought every day.
I personally know of a very successful bankruptcy attorney from Las Vegas doing time for structuring and only structuring. He was charging clients a $500 retainer… cash only because BK clients tend to bounce checks. He got caught depositing $9,000 at a time and holding excess cash in his safe until the next day to avoid the CTR. His bank sent in 2 STRs and he was audited.
The investigation found that he reported every dollar earned on his tax returns and that his office kept 10 yrs / accounting records of each sale. These logs, which included the client’s name, date and time of the payment, and the amount, were his downfall. When combined with his bank records, it was obvious that he was structuring… and he got 24 months of room and board at taxpayer expense. That’s what he deserved for keeping accurate records, paying his taxes and attempting to reduce his chance of an audit. He also lost his law license, business, savings, and more.
And these attacks on financial privacy are becoming more common. Want to buy gold coins with cash as a hedge against the U.S. dollar? Be careful, your bank will be happy to do its patriotic duty and report your transgression. A close friend of mine got caught up in exactly this issue.
Think you have financial privacy at your local casino? Not even close. These rules apply equally to banks and casinos. Each time you cash in $10,000+ in chips, or exchange $10,000 in cash, you get a CTR. Turn in $6,000 twice in once night and you might get an STR.
CTRs and STRs are the latest tools in the war on financial privacy. They can be deployed against political enemies, such as a lawyer, anyone who keeps cash outside of the banking system, and anyone who prosecutors deem worthy of their attention.
I expect that an analysis of these CTR vs. Financial Privacy cases would reveal that they begin as tax crime investigations. After the government has spent hundreds of man hours going through the books and records, and were unable to prove a criminal tax case, they went for structuring. In order to justify the work they had in to the case, they charged the target with structuring… a slam dunk conviction and another notch in their belt.
If you are in a cash business, the take away from this article is, don’t try to avoid the CTR. Deposit cash as it comes in and get ready for an audit. If you are thinking of opting out of the U.S. banking system, don’t do it by hoarding cash or buying gold with cash.
The only safe way out of the U.S. dollar is to form an offshore company and wire your money out. If you are a big time gambler, get a safety deposit box at your favorite casino to reduce your number of transactions.
I hope you’ve found this article informative. For similar posts, please check out my website at www.premieroffshore.com.