The Internal Revenue Service takes a particular interest in large currency transactions. While it is impossible for the IRS to track every bank transaction, they have enacted special reporting requirements for larger transactions in an effort to combat fraud and money laundering. The forms required to track these large transactions are known as Currency Transaction Reports (CTR).
These reports can play an important role in any number of federal prosecutions. Any white-collar crime involving bank transactions or large transfers of money could be prosecuted using CTRs as evidence.
Compliance with these federal laws is important, but mistakes can happen. If you are facing federal charges related to the failure to file a CTR, you should consult legal counsel right away. Attorney Doug Murphy is experienced in defending those accused of federal white-collar crimes. To learn more, schedule a free consultation as soon as possible.
Understanding Currency Transaction Reports
A CTR is a form used by banks or other financial institutions for any transaction greater than $10,000. The use of this form is mandatory in most cases whether the bank customer is withdrawing or depositing the funds. These CTRs are forwarded to federal regulators in their effort to combat money laundering.
Private individuals must comply with these regulations at all times. That said, there are some exceptions to these requirements. In general, there are three types of entities that do not need to execute a CTR when they make a large transaction. These exceptions include any
- United States bank,
- department or agency of a state, local, or federal government, or
- Corporation with stock traded on the New York Stock Exchange
The process for generating a CTR during a large transaction is largely automatic. Each time a bank or other financial institution is presented with a transaction of over $10,000, typical banking software will generate a CTR automatically. This software typically fills in the relevant tax data and customer information required on the form. Given that these forms are drafted by the banks themselves, they include a checkbox that gives employees an opportunity to flag it as suspicious. This would trigger a further investigation into the possibility of money laundering.
A bank or other financial institution is under no obligation to inform a customer when their transaction triggers a CTR. However, the bank officer must inform the customer truthfully if they inquire about the CTR requirement. While the customer has the right to cancel the transaction upon learning of the CTR requirement, it is likely too late to stop the bank reporting the situation.
The reporting requirement for a CTR is triggered when a bank customer initiates a transaction of more than $10,000, not when they complete it. If a bank customer refuses the transaction or modifies it to fall below the threshold, the bank employee is required to file a suspicious activity report.
A suspicious activity report, or SAR, is the standard form used by banks to report suspected criminal activity during bank transactions. The SAR must be filed by the bank with the Financial Crimes Enforcement Network. The Financial Crimes Enforcement Network – a division of the United States Treasury – is charged with investigating these transactions. This report must be filed within 30 days of the suspicious transaction in most cases. The investigation will go on without any notice being provided to the customer. In many cases, the targets of a SAR investigation will never learn it occurred.
Some customers that learn about the $10,000 reporting requirement will opt to lower the amount of their transaction. Others will break the transaction up into multiple smaller withdrawals or deposits. In many cases, a SAR will be filed despite these efforts. In some cases, it could lead to criminal charges. The process of breaking these payments up into smaller transactions to avoid detection is known as “structuring.”
Structuring is illegal. Despite each transaction not breaking the $10,000 threshold, federal law considers the bank's duty to file a CTR to consider cumulative payments. Efforts to evade this reporting could result in a criminal conviction.
Examples of Structuring
Dave has $15,000 he obtained from selling drugs. He wants to be able to use this money without holding onto it in cash form, but he is aware of the CTR reporting requirements. To avoid triggering a CTR report, he goes to two separate branches of his bank. At each branch, he deposits $7,500 will the sole purpose of avoiding the generation of a CTR.
Todd wants to buy a vehicle from a friend without paying sales tax. He needs $15,000 in cash, but he is aware of the CTR reporting requirements. On Monday, he goes to his bank and withdraws $7,500. He waits until Tuesday to withdraw an additional $7,500 in an effort to avoid triggering a CTR.
Tim wants to transfer the ill-gotten gains of a drug deal to another person. He is wary of banks and does not want to make the transaction in cash. To transmit $18,000 in cash, he purchases two separate wire transfers of $9,000 each.
Bill and Sue are married. They want to sell a pickup truck they own, but they don't want to pay any taxes on the transaction. They accept $20,000 in cash in exchange for the truck. To avoid the CTR requirements, they break up the cash in several deposits. Bill deposits $9,000 on Monday. Sue heads to a different branch on Tuesday and deposits $2,000. Bill sends $9,000 to his sister who deposits it in her own bank account. On Friday she transfers the money to Bill and Sue's joint account. These efforts are an example of structuring.
Federal Offenses Involving CTR Reporting
The federal rules regarding CTRs are more than just a regulation that must be followed by the banks. Any private individual that attempts to interfere with the CTR process could face federal prosecution. This offense is governed by 31 U.S. Code Section 5324.
There are three ways to face criminal prosecution regarding interference with a CTR. Any effort to evade these reporting requirements falls under this statute. Under the statute, there are three ways a private citizen could face charges for interfering with this mandatory reporting.
The first type of offense under Section 5324(1) covers any effort to prevent a bank or financial institution from filing a mandatory CTR. In addition to preventing the filing of these records, this section of the statute also bars efforts to prevent the bank from recording the transaction. This section is fairly broad. It could involve efforts to trick bank employees into not filing the necessary paperwork. It could also cover efforts to bribe a bank employee to not file a CTR or not make a record of the transaction in general.
Section 5324(2) is similar in wording. This section outlaws efforts to avoid the CTR requirements as well. While Section 1 deals with efforts to avoid a CTR at all, Section 2 targets the act of falsifying records. Any effort to evade reporting requirements through the use of an omission or misstatement of fact falls under this section of the statute.
Section three specifically targets the act of structuring payments discussed above. It is a crime to structure payments in an effort to avoid CTR requirements, and it is also a crime to attempt to do so. Knowingly assisting others in efforts to structure transactions is also outlawed under the statute.
A violation of this statute is treated as a felony under federal law. Upon conviction, you could face up to five years in federal prison and a fine of no more than $250,000. These penalties double if you are found to have structured more than $100,000 over the course of twelve months, or if this structuring occurred while you violated another federal law. This is common, as these charges commonly occur alongside money laundering efforts.
History of CTR Legislation
Mandatory CTR use began with the passage of the Bank Secrecy Act in 1970. Also known as the Currency and Foreign Transactions Reporting Act, this legislation was designed to block the use of the banking system to launder money or hide criminal assets. The law was tied up in the courts for years but was eventually widely adhered to beginning in the 1980s. This legislation was strengthened over the years, particularly after the September 11, 2001, terrorist attacks.
How a Houston Federal Criminal Defense Attorney Could Help
Understanding the requirements surrounding a CTR is important. These rules apply to all large transactions you might make, and in some cases, an investigation could trigger without you ever knowing it.
If you have been accused of a crime related to hindering the filing of a CTR, you are entitled to seek legal counsel right away. Attorney Doug Murphy has a lengthy track record of fighting for Houston residents under investigation by the federal government. No matter the facts of your case, Doug Murphy could work with you to obtain the most favorable outcome possible. To learn more about how an experienced attorney could help, schedule a free consultation with the Doug Murphy Law Firm, P.C. right away.