About a year ago, former New York governor Elliot Spitzer made a series of cash withdrawals from his own bank account. The total amount he withdrew came to more than US$15,000.
Spitzer used the cash to pay a company called Emperors Club VIP to procure high-priced prostitutes. After Spitzer’s bank identified the withdrawals as “suspicious transactions,” the IRS began an investigation, culminating in Spitzer’s resignation as governor.
It’s richly ironic that the so-called “Sheriff of Wall Street’s” political career ended due to a series of liaisons with prostitutes. But the aftermath of the investigation is also worth examining.
On November 6, Southern District of New York U.S. Attorney Michael J. Garcia announced that his office had no plans to prosecute Spitzer for “any offense” connected to patronizing prostitutes. Garcia claimed there was “insufficient evidence to bring changes against Spitzer for any offense related to the withdrawal of funds for, and his payments to, the Emperors Club VIP."
Garcia supported his decision by stating that his office had a longstanding practice of not charging individuals for soliciting prostitutes unless minors were involved. But he said nothing about why his office declined to prosecute Spitzer for a much more serious charge: money laundering.
An obscure law called the “Bank Secrecy Act” requires that banks report the withdrawal of more than US$10,000 to the U.S. Treasury. The form they must file is called a "Currency Transaction Report" or CTR.
Spitzer made obvious efforts to avoid having his bank file CTRs for the cash withdrawals he made. And that could constitute a very serious crime called structuring—a form of money laundering.
Structuring is the act of making an effort to avoid this filing requirement by breaking up a series of related cash transactions into smaller amounts. If prosecutors had brought structuring charges against Spitzer, he could have faced a five-year prison sentence and a US$250,000 fine. He could also have lost every dime in his bank account, under the law's severe civil forfeiture sanctions. And he faced possible loss of his law license if indicted and convicted.
To be fair, federal prosecutors don’t use the structuring statute very much, and there is considerable debate as to whether Spitzer’s pattern of cash withdrawals met the legal threshold for the offense. Perhaps Garcia didn’t indict Spitzer for structuring because he felt he had a weak—or non-existent—case.
However, just because Spitzer escaped prosecution for structuring doesn’t mean you will if you engage in similar conduct. Merely violating the law is sufficient to be imprisoned. You need not be aware that structuring is specifically a crime. Nor does it matter if every dime you structure is legally generated money that you paid tax on. Merely seeking financial privacy is a crime!
To enforce the structuring and other money laundering laws, banks have set up sophisticated surveillance mechanisms. This surveillance net caught Spitzer red-handed.
The bottom line: If you’re depositing or withdrawing more than US$10,000 in cash from your domestic bank account, let the bank know what you’re doing and inform them to kindly submit whatever “paperwork” is required. Don’t try to break down transactions so that no single transaction exceeds US$10,000. You may not be politically connected enough to avoid prosecution and forfeiture if you fail to heed this advice.
Copyright © 2008 by Mark Nestmann
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