In Banking-Finance

Recently a Springfield, Missouri business owner pled guilty to structuring financial transactions to avoid federal reporting regulations. The activities occurred over a period of time between June 29 and November 1, 2011, and between July 25 and October 6, 2015.

The business owner made multiple withdrawals during both time periods where the amount was under $10,000. Many of the withdrawals were made within days of each other. The total amount of the withdrawals made in 2011 was $137,200 while the total for those made in 2015 added up to $85,000.

Avoiding Documentation

The defendant, Douglas Gooch of Springfield, pled guilty to the charges, admitting he kept the withdrawal requests under the $10,000 threshold to prevent the bank from filing a Currency Transaction Report. Any time a person makes a withdrawal for cash or a deposit over this amount, the bank is required by law to fill out the CTR and report to the Department of the Treasury.

Gooch told employees at the bank that he was trying to avoid having a CTR filed against him. During the first period, 18 withdrawals were made. His total amount withdrawn during both time periods was $222,000.

The legal requirement was put in place to help banks and the Treasury determine the possibility of illegal activity, including money laundering. Many illegal companies, such as drug dealers will attempt to hide money in businesses and bank accounts to avoid detection. When a business requests multiple withdrawals under the $10,000, it is called structuring, which is an illegal activity even if the money is not obtained illegally. (Frequent cash withdrawals land Springfield man in court, April 2016)

Practical Implications

From what has been relayed of this story, Gooch was the owner of an antiques store with no ties to drug dealers. Even though the original regulation, which is part of the Bank Secrecy Act, was designed to wage war on drug trafficking, the issue of structuring has gone well beyond that. The person may not be conducting any illegal activity, but just choosing to avoid having a CTR filed.

Once a report is filed, the government reviews the case, and it may seize the bank accounts if it has a valid reason. Unfortunately for many, the reason does not have to be proven.

Concerns Over Misuse

One of the primary concerns about this law is that it can be used in any way the government sees fit. In the past, legal documentation stated the person must have willfully kept deposits below the $10,000 to be accused of structuring, The word “willfully” was removed, which basically means a person who knows about the law and keeps the deposits under the required reporting amount could be trouble.

In fact, there may be legitimate times when a business will always make deposits below the threshold. For instance, some insurance companies only provide coverage for up to $10,000. A business would make deposits before the amount reached the total.

Other people like to maintain a low profile and do not want to be reported, so they keep their deposits from being reported. Unfortunately, banks must report suspicious activity, which means anytime they see multiple deposits of less than $10,000, then they may report it as such.

Even if no illegal activity is found, the business’ funds can be seized and never returned or held for a long period of time. Companies can go out of business because they can no longer afford to keep running without the cash. (The federal structuring laws are smurfin’ ridiculous, March 2014)

The law against structuring is one that can impact businesses of all sizes and in all industries. The repercussions from the law can result in long-term damage for the business. In this case, not participating in illegal activities may not be enough of a defense to protect the innocent. When saving for a large and important commitment, like real estate, money in a savings account will be your saving grace; however, it is vital that you avoid illegal activities as well as making abnormal deposits in your account. If you are concerned, then feel free to find a financial advisor or speak with your bank.

This news coming from the FDIC is vital to remaining informed and staying in the financial new loop. Commercial businesses must be aware of these nitty gritty laws and regulations that can make or break one’s business. Stay informed with The Power Is Now to ensure that you protect your rights and protect your livelihood! Real estate is your largest asset, meaning that you must stay alert and aware of banking regulation, so that you are not caught unaware. Keep a sharp eye on your finances.  As an MBA, I am here to help you. Email me at eric.frazier@thepowerisnow.com now. The Power Is Now!

 

Eric Lawrence Frazier, MBA

President and CEO

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