Civil asset forfeiture: a new reason to be careful with manufactured spending?

The vanilla reload game, as well as a lot of other games, have been around long enough and discussed thoroughly enough that occasionally you’ll see a mention of structuring, a fairly obscure area of the law. Structuring is the (illegal) practice of breaking up deposit amounts so as to fall below the $10,000 threshold that triggers a currency transaction report.

The purpose of structuring laws was to catch money launderers, but as laws sometimes do it has expanded beyond its original purpose. The Economist has an article about an interesting case with relevance to anybody cashing out debit cards with money orders, depositing U.S. Mint coins, or that sort of thing:

THE names of court cases usually make sense. Think of “US v Bernard Madoff” or“US v Timothy McVeigh”. What, then, is “US v $35,651.11”? Why is Uncle Sam prosecuting a heap of money?

The answer, alas, makes even less sense than the name on the docket. Terry Dehko and his daughter Sandy Thomas (pictured) run a grocery store in Fraser, Michigan. It sells everything from bread to hand-made sausages. Fairly often, someone takes cash from the till and puts it in the bank across the street. Deposits are nearly always less than $10,000, because the insurance covers the theft of cash only up to that sum.

In January, without warning, the government seized all the money in the shop account: more than $35,000. The charge was that the Dehkos had violated federal money-laundering rules, which forbid people to “structure” their bank deposits so as to avoid the $10,000 threshold that triggers banks to report a transaction to the Internal Revenue Service (IRS).

Prosecutors offered no evidence that the Dehkos were laundering money or dodging tax. Indeed, the IRS gave their business a clean bill of health last year. But still, the Dehkos cannot get their cash back. “They offered us 20%,” says Ms Thomas, “But if we settle, it looks like we’re guilty of something, which we’re not.”

I’ve seen it argued in various forums that you can deposit amounts slightly below $10,000 just so long as you’re not doing it specifically to evade the reporting threshold. And legally, I suppose that’s true. As a practical matter, though, it only takes one bad encounter with a bank employee and one ambitious government employee to take your money. Note that there’s no trial or presumption of innocence–the government can simply swoop in and take your money:

In criminal cases, the government can confiscate assets only after a conviction. Under “civil forfeiture”, however, it can grab first and ask questions later. Property can be seized merely on the suspicion that it has been involved in a crime. Citizens have no right to a swift hearing. For a small business, that can be fatal. The Dehkos’ store is surviving by paying suppliers late.

It’s not a criminal matter, so that’s a plus, but still: you have to endure a lengthy wait and a court battle to get your money back. I know from reading flyertalk and other forums that some people hit this stuff pretty hard. Should they be worried? Probably not, but who knows.

Your thoughts?