Today, a growing number of small business owners are unintentionally finding themselves on the wrong side of the law. Under a statute aimed at identifying organized crime, small businesses and farmers are being prosecuted for ordinary business transactions. Fortunately, Congressman Andy Harris (R–MD) is attempting to fix that.
The federal government requires banks to file a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCEN) on cash transactions larger than $10,000. The reporting requirement is a money laundering statute designed to catch parties such as drug traffickers conducting an illegal business using large cash transactions. While some are aware of this requirement, few know that it is illegal to engage in repeated deposits of under $10,000 to avoid this reporting requirement. This “structuring” law is a preventive statute designed to force the reporting of conduct that is not itself a crime, but may lead investigators to other criminal activity.
There is nothing wrong with the government wanting to know whether a mobster is making large cash deposits. The problem is that many honest business owners are unaware of this statute and can wind up unwittingly violating the law by making deposits of less than $10,000 in order to avoid the paperwork involved. The structuring portion of the statute, however, makes ordinary conduct criminal, ensnaring Old MacDonald along with Don Corleone.
Last year, the federal government charged Randy and Karen Sowers, the owners of a successful Maryland creamery, with structuring and seized $62,936 from the company’s bank account. There was no evidence that they were involved in tax evasion, money laundering, or any other illegal conduct. According to Randy Sowers, “The level we deposited was what it was and it was about the same every week.”
Did the prosecutor have evidence that they were intentionally trying to avoid CTR? No, the federal prosecutor argued that repeat deposits of less than $10,000 demonstrate the Sowers knew of the CTR requirement and intentionally avoided triggering it.
Eventually, the couple settled this dispute by agreeing to forfeit $29,500 to the government. Randy Sowers stated, “I didn’t do anything wrong, but we had to settle because we had no other choice,” and their attorney added that federal prosecutors had overreached by applying a statute meant to deter money launderers and drug dealers to small business owners who had no ill intent.
Representative Harris has put forth a remedy by way of the Small Business Deposit Relief Act of 2013 (H.R. 1184). Where structuring occurs absent a connection with another crime, this bill would abolish jail time for first-time offenders, and reduce the penalty from five years’ imprisonment to one year for all other offenses. This means that in order to be jailed, a person must first be given a warning by the government that his conduct is illegal.
There is danger in creating crimes to prevent crimes. We cannot criminalize everything that criminals happen to do in commission of crimes. Yes, criminals deposit cash—so do farmers, small business owners, and pretty much everyone else, though probably not at the same levels.
Burglars often wear dark clothes to avoid detection, and white collar criminals wear suits to exude trustworthiness. Should Congress pass a law requiring a report when someone purchases dark clothes or a suit?
Creating preventive crimes puts innocent people at risk. The whole idea of the statute was to catch money launderers. If prosecutors have time to indict otherwise innocent people, the statute (not to mention the prosecutor) is failing in two ways: (1) It isn’t identifying the people whom the statute was designed to catch; and (2) it is a trap for the innocent and unwary.