Now that a lot of folks are no longer able to use Bluebird to earn credit card points, many have identified money orders as the tool of choice. That may or may not be the case–I’m in the “don’t bother with money orders” camp–but for those of you who do decide to deposit a bunch of money orders, there is one federal crime you need to know about: structuring.
Structuring is when you break up your bank deposits in order to avoid drawing attention to yourself. Specifically, it’s about trying to keep banks from filing reports on you. Here’s an excerpt from the actual statute (bolding is mine):
No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—(1)
cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508;
In other words: banks are required to file certain reports when they see suspicious patterns of deposits. The most well-known regulation concerns deposits of more than $10,000 in cash. If you do that banks are required (if memory serves–it’s been a few years since I had training on this stuff, so by all means feel free to correct me here) to file a SAR, which stands for Suspicious Activity Report. But they can file a SAR for anything that looks suspicious for any reason. An unusual pattern or activity is fair game; it doesn’t have to be $10,000. I spent well over a decade working for several banks, and they take financial crimes regulations very seriously (for normal people, anyway–if you’re a billionaire I presume it’s a different story). Employees are encouraged to file reports if something looks even slightly awry.
If this sounds like an odd law, you have to understand that it arose as a way to catch people who were laundering drug money. Unfortunately, innocent people have been swept up in this just for making deposits from cash-based businesses. I haven’t heard of any MSers getting caught up by this law, and honestly I think the odds are slim, but better safe than sorry. Don’t try to avoid having the banks file reports on you. There’s nothing wrong with them filing a report if you’re not doing anything wrong; the vast majority of reports lead to no action whatsoever since usually there isn’t anything funny going on.
That brings me to a post today from some blog calling itself “Pointchaser”. Here’s the important paragraph:
This one is tricky and could cause a lot of trouble if you go about it wrong. I try to limit my monthly money order deposits to $9,000 across two checking accounts. Federal law requires banks to report suspicious activity, like large deposits that exceed your monthly income. Any deposit of $10,000 or more gets reported to the Financial Crimes Enforcement Network (FinCEN), but I’ve read that if you split up $10,000 worth of deposits within 30 days, it may still get reported. Obviously, I’m not doing anything illegal, but I’d rather avoid the hassles of being investigated for money laundering, so I keep my deposits under $10,000 per month just to be safe.
I’m not a lawyer, but that seems like a straightforward definition of structuring to me. The blogger stated awareness of required FinCEN reporting as well as stating her desire to evade said reporting. That’s what structuring is, yes?
After yesterday’s post, the last thing in the world I wanted to do was put up another one criticizing another blogger. That’s not what this blog is about (it’s more of a TBB thing to increase his Alexa ratings), and as God is my witness I was actually starting to mentally formulate an entrepreneurship-themed post entitled “In Praise of Million Mile Secrets”. (Believe it or not, I’m serious about that one–watch this space in the weeks to come!)
But I find this appalling. She ought to know better, and she reacted badly today when told by one or two dozen people that she was breaking the law and encouraging others to do so. Let’s hope she reconsiders. Here are the prescribed penalties:
Whoever violates this section shall be fined in accordance with title 18, United States Code, imprisoned for not more than 5 years, or both.
Now with that said, I’m open to the idea that my understanding of this topic may be in error. I’m not a lawyer, after all. What do you all think about this one?
Noah @ Money Metagame says
The one sentence sums it all up pretty perfectly:
“Obviously, I’m not doing anything illegal, but I’d rather avoid the hassles of being investigated for money laundering, so I keep my deposits under $10,000 per month just to be safe.”
What’s hilarious to me is that depositing all of this money, $10k+ or not, IS perfectly legal on it’s own. It’s only the act of keeping those deposits under $10k deliberately that makes it illegal!
I don’t always commit felonies when trying to avoid the bank shutting my accounts down, but when I do, I make sure to post online with my full name easily accessible. I’d chalk it up to an innocent mistake if it wasn’t for the blogger’s misplaced defensiveness on Twitter and refusal to admit they might be wrong.
I think Noah sums things up pretty well. I was one of said folks on Twitter (and in fact, the first one to have commented on her blog in a polite way, which incidentally, as of this comment at 9:29pm, hours after posting, has not been responded to).
For her to do it, I don’t see an issue, she’s in control of her own destiny. Its when she’s advocating it as an acceptable strategy. Its like MMS telling the world to apply for 5 BOFA Alaska Air Cards… except, one is actually a crime…
“Try dealing coke to boost your credit card rewards!”
As a lawyer and former federal criminal prosecutor, you are correct. This is textbook structuring. And continually paying your credit cards with large amounts of money orders is also likely to attract suspicion. Your intent doesn’t matter, if you have more than 10k+ to deposit, whether cash, money orders, etc, and purposely break it up to avoid reporting it is structuring. Even if you obtain 10k+ legally through MS you are still structuring if you purposely avoid the reporting requirements. Better to stay above board and have it reported then have the government seize your assets and have to prove their legality and origin to get the money back.
Karen B says
She really should know better. I was actually thinking it was structuring when I read it…. Long before I opened up Twitter and saw the craziness!
I’m not sure if I’m confusing this but am I better off depositing $10k every week rather than $2k every week? Seems like $2k would be considered structuring but depositing $10k+ weekly would just require the bank to file multiple reports.
I missed most of the fun. I tweeted a link to the IRS guidance early on but I guess those tweets were all deleted. Must have been fun.
For your reading pleasure: https://www.irs.gov/irm/part4/irm_04-026-013.html
It was a fun day on Twitter.
If you only have 2k to deposit weekly there likely won’t be an issue. It’s when you have 10k+ to deposit at a time and split it up either into multiple deposits or over a few consecutive days to avoid reporting that is an issue. Businesses and individuals make large deposits and have reports issued all the time, it’s the suspicious activity to avoid reporting that leads them to Investigate if it’s criminal in nature and subjects you to seizure.
Let me emphasize that I am not a lawyer. That said: my understanding is that if you’re splitting up a $10K deposit into a bunch of $2K deposits so that the banks won’t notice you, then you’re structuring. But if you’re just doing a bunch of $2K deposits because that’s all you feel comfortable carrying around in cash at one time, or because that’s the limit of your debit card, or whatever–then that’s fine. (Although again, keep in mind innocent people with the law on their side have been snagged on a few occasions before.)
I have and will continue to make $10k+ deposits. Ive never been issued the “hassle” paperwork as my bank – right or wrong does not consider MO cash.
I’ve read reports that this may not be the correct interpretation. I’ll concede this if true.
I think this is a misunderstanding. She would clearly be structuring if what she was doing was eligible for structuring. But it isn’t. It’s money orders and not cash.
Over $10k in cash requires a LCTR, not an SAR. Cash transactions over $3k can also be reported on an LCTR form if suspicious. LCTR stands for large cash transaction report.
Breaking up your deposits to avoid the LCTR thresholds is indeed structuring.
An LCTR is perfectly fine and plenty of them get submitted daily. There is nothing illegal with handling over $10k in cash. To my knowledge, very few LCTR filings ever warrant any sort of follow up questioning.
I also note that businesses can get exemptions, or higher thresholds, related to LCTR thresholds. Movie theaters, for example, back in the pre-CC days would often deposit over $10k cash per day. They would often have an exemption up to a higher amount. It would be noted in the account.
SARs can be filed for any suspicions transaction, cash or otherwise.
I could be wrong, but I don’t think it needs to be cash for the structuring laws to apply; my understanding is that it’s any activity designed to get the banks not to file reports on you.
Andrew C says
And my understanding is that no paperwork is issued to the customer anyway. It’s like double secret probation.
The Pointchaser blog belongs to Ariana Arghandewal, formerly one of FTG’s paid writers. I applaud her relentlessness, but the scale that she’s MSing on and the extend to which she is talking about this will likely lead to some shutdowns and other trouble for followers who attempt to structure without realizing what they’re doing.
Both correct. You won’t know and LCTR or SAR has been filed since they have all the information on your account and submit them electronically within 15 days of the transaction. Money orders are cash equivalents and subject to reporting.
FinCEN Currency Transaction Report (CTR), must be filed for all currency transactions involving either cash-in or cash-out of more than $10,000 (31 CFR 103.22(b)(1)). Multiple currency transactions must be aggregated, and a CTR is required, if the business knows or has reason to know that the multiple transactions are by, or on behalf of, any person and result in either cash-in or cash-out totaling more than $10,000 in one business day (31 CFR 103.22(c)(2)). The CTR must be filed within 15 calendar days following the day the reportable transaction occurs.
Suspicious Activity Reports get generated when you make cash or cash-equivelent transactions ranging from $3000-$10,000. Both CTR and SAR reports get investigated by law enforcement to varying degrees. Generally they are looking for money laundering and structuring.
Structuring (http://www.law.cornell.edu/uscode/text/31/5324) involves making monetary transactions in an attempt to circumvent reporting requirements. The basic reporting requirement kicks in when moving more than $10,000 in cash in a day. A report will still be generated even if you do smaller transactions at multiple branches of a bank in one day that aggregate to over $10,000. The money in this case does not need to be from illegal conduct. The only requirement is that you are structuring transactions in order to avoid the reporting of the transactions.
In this bloggers case it was a bad idea to go telling people on the Internet that she is structuring her transactions so that they are not reported. You would be surprised at how easily law enforcement can tie her to the posting.
I have a question then..
Is structuring your MS the same as structuring your deposits?
Let’s say, you only actively MS $9k a month. You then only have $9k to deposit a month. Is that structuring?
I thought it was just clickbait.
Dang. Go sit on a beach in Jamaica and miss all the fun.
One thing I’ve noticed about people in general, (me, included) is that once you’ve erected a big wall of self deception, it is really hard to tear it down.
“What I’m doing isn’t structuring, it’s a good idea, and I should tell everyone on the interwebs about it.” “So long as I make money doing it, there is no problem with sharing sensitive information in my blog.”
As noted in another comment, the blogger doesn’t know whether or not a SARS has been filed on her; they aren’t announced. But that level of self deception, combined with absolute ignorance of how law works (never try to interpret. Words mean exactly what they mean,) means that she just plain should really not be writing for public consumption. Whether one have one reader or a thousand, making statements as an authority figure requires a higher standard of accountability.
“One thing I’ve noticed about people in general, (me, included) is that once you’ve erected a big wall of self deception, it is really hard to tear it down.”
Yep. A useful question I like to ask myself from time to time: “If I were wrong, how would I know?”
“Your intent doesn’t matter…and purposely break it up to avoid reporting” – Stephanie
You are contradicting yourself.
There quite a few statutory mistakes in this article. I’m surprised many have not caught it, especially that person who says she was a former lawyer and federal prosecutor.
“…if you have more than 10k+ to deposit, whether cash, money orders, etc…” -Stephanie
Not entirely correct. It appears that you are unaware of the intricacies of depositing mix instruments.
There quite a few statutory mistakes in this article. I’m surprised many have not caught it, especially that person who says she was a former lawyer and federal prosecutor.
For one, this article is flip-flopping on the actual CTR regulation, which is filing for cash (and cash-like) transactions of MORE than $10,000. In other words, EXCLUDES $10,000 or less.
There are other material errors in this article.
Money orders are not currency. Read the ctr form that Is filled out online at IRS.gov.
Currency ≠ MO
PURCHASING money orders to stay below 10k / multiple transactions, multiple days – is structuring. Depositing them really does not seem to be.
Incidentally a KATE with working money order function will spit out more than 10k of MO with no paper work in a day. I’ve done this but will not do it any longer now that I know the rules.
So, hypothetically speaking,
I buy $12k in pe gc’s from an online source with a cc. I now have $12k in cash equivalent currency, which I wish to buy MO’s to deposit into some of my bank accounts. Am I structuring if I do anything but buy all my money orders at once? Am I structuring if I do anything but deposit all of those money orders in one lump sum?
What if I buy $1000 in gc’s at my grocery store, another $1500 at Walmart, and then stop by walgreens and a few other stores to buy more, picking up a few money orders along the way. As long as I don’t buy more than $3k worth of mo’s in a day at different stores and don’t break up deposits of more than $10k in a few days time into smaller amounts or intentionally keep it just below the threshold, then I am not structuring?
With the death of Serve, this seems a timely point to help clarify things for folks such as my self, who might be tempted by the relative ease of MO’s vs reselling or other avenues of MS.
Liquidating large amounts across multiple retailers in a day or a couple days seems more of the definition of structuring than spreading the depositing of.
Remember, the point is about reporting. e.g. you go to your favorite Money Order outlet, and they say “we see you around a lot, we need you to fill out a SAR in order to get your Money Orders” and you say no, then, you’re trying to avoid reporting, its not structuring per-say, but it is not good. The key here though is that Structuring / Smurfing at least some of the material I read, is more about spreading deposits to avoid reporting.
I like that!
If I am wrong it is because my bank is wrong.
Today I deposited 18k of MO. I of course asked about their rules. They said, “we are not required to fill out anything for these deposits as they are not cash. If we wanted to, we could, at our discretion fill out a SAR. We can fill out an SAR for any amount. The point where rules kick in for CTR are at the point where the CASH is changing forms. To MO, deposit, gift cards – anything involving turning cash into something else. If you buy a car with cash you have to fill out the paper work.”
Unfortunately I’m worried now my bank is wrong and I’m setting myself up for scrutiny later according to all the Twitter IRS professionals out there who say Ariana is advising people to break the law.
Ariana explicitly stated she was structuring her deposits so as to avoid producing bank reports. That’s the definition of structuring.
Like someone slamming on the brakes when they see a cop when they are doing 50 in a 55.
She is clearly trying to build behavior (structuring) that doesn’t illicit the reaction she thinks it does. Just a shame of a post in general.
“formerly one of FTG’s paid writers”
And suddenly the belligerence and “fight trolling with trolling” attitude makes so much more sense…
Bob D says
interesting responses. Not sure if limiting yourself to $9000 per month would be considered structuring. It seems if you deposited $18,000 across 2 or more accounts, then that would be structuring but limiting the amount “you earn” to under $10,000 should not be the same thing. But I guess MSing in general is iffy in the eyes of the law
Anybody care to discuss how oppressive the law is, and how to get it changed? It’s as bad as civil asset forfeiture and everybody is getting on this lady’s case. Yes, she is in error- she’s structuring. But the law is wrong. We the people should change it.
In response to the last couple of comments:1. No, MSING may be suspect to cc businesses, but there’s nothing remotely “illegal” about it, which is why no one should be worried about these stupid reports.
2. Unless you approve of illegal drug and gun dealers (among others, including terrorists), you should be glad these laws exist and wish they were more strictly enforced.
IMO, the best practice is to tell your bank what you’re doing (as long as you don’t have CCs with that bank that you are MSING on, of course).
I may be completely mistaken about this but I thought the law had been amended to include consideration of intent before prosecution to avoid the stories about innocent people being unwittingly trapped by the law.
andy shuman says
Let’s just forget about the letter of the law for a moment and ask ourselves this.
Do we have a strong and unwavering faith in low-level banking employees to ALWAYS do the right thing?
Do we have the same unwavering faith in trigger-happy law enforcement agents to ALWAYS do the right thing and not blow your little endeavour out of proportion?
Does it matter whether you’re right or wrong when you’re fighting the government that has already seized your assets? How much is it gonna cost you to prove your case?
If this is not bad enough, there is another little-known government agency called IRS that is also interested in structuring. How much would it cost you to defend an audit?
Is it really worth the risk?
This is exactly how Elliot Spitzer got caught, and he should’ve known.
Actually it just has to add up to $10,000.00 or more within a certain time period, and that time period starts when the first MO is purchased, not on a calendar month. And a SAR from a Money Services Business can can be filed on transactions that add up to $2000.00 or more. MSBs also monitor the transactions, so if the same name comes up as purchasing multiple money orders, it triggers a review. This can also have consequences for the business that is selling the money order if they fail to recognize the pattern or fail to file a CTR. MoneyGram and Western Union have been fined Millions for failure to report in the past and have built out their Compliance teams extensively, so the original author has more than likely reported in some way. But these rules work for cash, and what they call non-cash monetary instruments. This includes but is not limited to money orders, online currency, prepaid credit and debit cards, and gift cards. This is just the start, the companies/banks that accept Money Orders are also required to report suspicious activity, so funds are followed quite closely. However, you also have to understand that FinCEN takes reports from several different countries that have no financial crimes network of their own, so this includes, Canada (they should be getting their own soon), Mexico, China and many more that are encompassed under the term “rest of world”. So the likelyhood of actually being investigated are slim, but that doesn’t mean that you won’t be.
You will NEVER be told if a SAR or a CTR is being filed, however, they can ask for multiple forms of identification, that are then recorded in their system and on the forms.
Chip Douglas says
I’ll never forget the the time I was flying to SFO, got off the plane. Got my reasonably priced rental car from budget. It was a pimped out Toyota corolla (24 inch rims) I was arrested because the tint on the windows was too dark. But they checked my Wendys Platinum AMEX card, they saw I was doing crazy amounts of manufactured spending. I mean I think they were really more upset about the hookers and blow that was being put on there. But who knows. All I know, I had a sick ass toyota corolla with DUBS, busted out that prison. Maxed out my Wendys AMEX plantium card on spicy chicken nuggets. Called it a day.
Sounds good. I think it would be easier than trying to find a store that will still let me buy a money order with gift cards. LOL.
Da Teller says
I worked for the fraud department of one of the big banks of America.
A CTR report is filled in the event of any movement (deposit/withdrawal) of $10,000.01 and above. It has to be CASH. Money Orders, although referred as money like instrument, is treated by the bank as a check NOT CASH.
Scenario 1: If you come in to deposit $11,000 in any denomination of dollar bills, we will inform you -the customer- that we have to fill a CTR. If you decide that you don’t want to have a report written on you and would like to deposit only $6,000 instead, the CTR will be filled anyways.
Scenario 2: If you come to deposit $6,000, knowing that it won’t be a red flag… But then decide to go to another bank to deposit another $6,000, since you have deposited more than $10,000.01 in 24 hours, the CTR will be filled.
Scenario 3: if you come in today and deposit $6,000 cash + $5,000 in money orders, you are in the clear. If you do this 3 days in a row or every week and every month, it is an ABNORMAL pattern and will be flagged to the fraud department to investigate WHETHER it is money laundering.
The Feds are all over the cash movement, looking for drug deals and money laundering. The IRS is all over keeping records of any cash movement of more than $10,000.01
This activities are reported by entry level employees “IF” they feel like taking their time to fill out the paper work. 90% of the cases, paper work is filed.
The process from the Fraud Department can’t be disclosed, sorry.
But I will tell you that structuring and large deposits of cash do not apply to people trying to get airline miles.
Insider comment: those that move large amount of money to rack up points or miles only have to worry about credit card policy. For the fraud department and the IRS and the feds, you all are nothing but a mosquito in their ear getting in the way of their job, THE REAL WORK that gets done.
Too much paranoia going on with this subject.
I think this comment nails it. Way to go da teller.
@dcatast. Which bank is this that you use?