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This article is not meant to frighten, but to inform you of the reporting requirements and consequences if you choose to violate the law.
Your store has the potential to generate large amounts of "cash" on any given day or week, and how you handle that cash could determine your future. When depositing cash receipts, you should understand and follow the Currency Reporting Requirements that require financial institutions such as banks, credit unions, and savings and loans to complete paperwork for all cash transactions of $10,000 or more.
With our 40-plus years of experience, we have seen a lot of individuals who believe they can avoid the reporting requirements by using deceptive means. The following case summary is from a press release issued by the United States Attorney's Office. The law enforcement agencies that conducted this investigation were the Internal Revenue Service -- Criminal Investigation, the United States Immigration and Customs Enforcement (ICE), the Washington State Patrol, the Ellensburg Police Department and the Yakima Police Department.
On May 7, 2009, a convenience store owner was sentenced to 11 months in prison after pleading guilty to eight felony counts of structuring deposits of U.S. currency in violation of federal law. He was taken into immediate custody to serve his sentence and will be on court supervision for one year after his release from prison. He also forfeited $407,759.86 to the government.
How did he get in such trouble? In 2006, agents with the U.S. Immigration and Customs Enforcement were informed the convenience store owner had made numerous deposits of U.S. currency into his checking account at a savings and loan in amounts near, but never exceeding, the federal reporting requirement of more than $10,000. Additional investigation revealed similar activity at other banks where the c-store owner maintained accounts. At the time, he was the owner of a gas station and mini-mart located in Ellensburg, Wash. The investigation revealed the c-store owner engaged in approximately 1,222 such transactions over the course of five years.
The Bank Secrecy Act requires banks file certain reports with the government and preserve designated financial records with respect to transactions exceeding specified monetary amounts. Banks and similar financial institutions are required to file a FinCEN Form 104, also known as a Currency Transaction Report (CTR), with the Secretary of the Treasury whenever they engage in transactions for the payment, receipt or transfer of United States currency in amounts exceeding $10,000. Before concluding any such transactions, the financial institution is also required to obtain valid identification of the individual conducting the transaction.
Instructions for the FinCEN Form
Financial institutions must file a FinCEN Form 104 (Currency Transaction Report) for each deposit, withdrawal, exchange of currency, or other payment or transfer by, through or to the financial institution that involves a transaction in currency of more than $10,000. Multiple transactions must be treated as a single transaction if the financial institution has knowledge that (1) they are by or on behalf of the same person, and (2) they result in either currency received (cash in) or currency disbursed (cash out) by the financial institution totaling more than $10,000 during any one business day.
Generally, financial institutions are defined as banks, other types of depository institutions, brokers or dealers in securities, money transmitters, currency exchangers, check cashers, and issuers and sellers of money orders and traveler's checks.
The term currency applies only to the coins and paper money of the United States or another country. It does not include checks, drafts, wire transfers or other written orders that do not involve the physical transfer of currency.
To see what a CTR looks like, and for more complete information on how, when and by whom the form should be filed, visit http://www.irs.gov/pub/irs-pdf/ffc104.pdf.
Avoid Legal Trouble
The most common way to avoid the reporting requirements is "structuring." Structuring is when an individual or individuals start out with more than $10,000 in currency (cash) and conduct smaller transactions with a financial institution on the same day or over several days in an attempt to trick bank personnel into believing a CTR is not required.
One example of structuring is as follows: depositing a total of $50,000 in cash into a bank by breaking it up and making multiple deposits in amounts below $10,000 ($9,999 for example), at different branches of that bank or even at different banks, on the same day or over a number of days.
Note: There is nothing wrong with conducting business with large amounts of cash -- it is the structuring of cash transactions, as described here, that is illegal.
Structuring is punishable by imprisonment of up to five years and/or a fine of $250,000. If the structuring involves more than $100,000 in a 12-month period, or is performed while violating another federal law, the penalty is increased to imprisonment of up to 10 years and/or a fine of $500,000. Also, the government may seize and forfeit property involved in, or traceable to, structuring.
Does the crime of structuring require that the currency come from an illegal source, such as drug dealing? No. It is not necessary to prove the structured funds came from criminal activity in order to obtain a conviction.
The bottom line is simple -- trying to hide money from the government could put your business and your family's financial future at risk. Don't take your hard-earned legitimate income and transform it into illegal financial transactions. Otherwise, you could be "in store" for an inconvenience.