Referenced in our Newsletter Volume 3, Issue 12 - December 2004
Structuring Financial Transactions
Many people are aware that the U.S. Government requires that certain types of information be reported when large quantities of cash are moved in or out of financial institutions (e.g., banks, savings and loans, credit unions, etc). Often people conducting high-value financial transactions will ask the bank teller "What is the dollar amount required to file a report with the government?" The response is a Cash Transaction Report, CTR, (IRS Form 4789 / FinCEN Form 104) is required to be filed for any amounts cumulatively exceeding $10,000 for a single day.
Once informed, customers often lower the amount of the transaction to less than $10,000. Generally, the new amounts deposited or withdrawn reflect values such as $9,900, $9,800, or $9,500. However, once the change in amount is made, the financial institution is obligated to file a Suspicious Activity Report, SAR, (TD F 90-22.47) without alerting or notifying the customer of this fact. The reason why this happens is because "structuring" deposits or withdraws to avoid detection is a money laundering technique.
Under Title 31 - Money and Finance, Subtitle IV- Money, Chapter 53 - Monetary Transactions, Subchapter II - Records And Reports On Monetary Instruments Transactions, Sec. 5324, Structuring Transactions To Evade Reporting Requirement Prohibited, the following conditions define the violation of this statue:
Any person who, for the purpose of evading the CTR reporting requirements,
(1) cause or attempt to cause a domestic financial institution to fail to file a report;
(2) cause or attempt to cause a domestic financial institution to file a report that contains a material omission or misstatement of fact; or
(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
For more information on Title 31, refer to the Government Printing Office Access site.
Thus, "structuring" financial transactions to avoid filing requirements is a form of money laundering and subject to penalties and forfeitures under the current laws and regulations. In fact, many of the SAR submissions are based on people behaving in this fashion and our focus for this month's link chart reflects such as case.
The specific SUBJECT was identified based on her occupation (a medical profession) and her frequency of SAR filings. Although many potential targets were exposed using this approach (a filtered SUMMARIZE), this scenario is specific only to the individual selected, as shown below.
The network is extended to show the SARs (also referred to as DCNs for Document Control Numbers) on which the SUBJECT was reported. The diagram below depicts 10 individual SARS that are split into different columns based on their filing year.
The first column shows four SARs filing in 2002 and the second column shows six filings in 2003. Generally, the specific dates for her SAR filings are somewhat sporadic which generally does not reflect a legitimate or regular business practice - as defined by the SUBJECT's stated occupation. Also shown in the diagram is a single account used for all of these SAR transactions.
Each SAR supports a "NARRATIVE" which represents a detailed description, provided by the financial institution, describing the nature of the suspicious activity. For this SUBJECT, each SAR narrative similarly stated the following:
"THIS CUSTOMER HAS BEEN PREVIOUSLY REPORTED FOR MAKING LARGE CASH WITHDRAWALS JUST UNDER THE CTR REPORTING LIMIT. THIS IS UNUSUAL ACTIVITY AND MAY IMPLY THAT THE CUSTOMER IS ATTEMPTING TO AVOID CTR FILING REQUIREMENTS. THE BANK REPORTED THAT THE CUSTOMER INTENDED TO MAKE A CASH WITHDRAWAL FOR OVER $10,000, HOWEVER, ONCE INFORMED OF THE CTR FILING REQUIREMENTS, THE CUSTOMER LOWERED THE AMOUNT TO BELOW $10,000."
As was previously discussed, this type of behavior is illegal and constitutes "structuring" on behalf of the SUBJECT. From here, the ADDRESS, PHONEs, and SSNs (Social Security Numbers) are brought into the display.
As is quickly observed, the thicker lines to each of these objects indicate they were consistently referenced in each of the SARs. The ADDRESS with the thinner line showed a variation on the street name (AVE. verses AVENUE) used in one of the SARs. The fact that these objects, along with the ACCOUNT, have been consistently used tells investigators that she is not actively trying to "cover her tracks" by varying the spellings or information provided to the bank. Keep in mind, the SUBJECT does not know that these SARs are being filed on her.
The next diagram brings in other entities connected to the ADDRESSes, PHONEs, or SSNs.
Only a single object is returned - an additional SUBJECT. What investigators discover is that this new SUBJECT is actually an organization - which is the name of the medical practice for this doctor. The investigators interactively change the icon to an ORGANIZATION to more accurately convey the contents of the analysis. At this point, the investigators know that additional SARs will be exposed once the links to the ORGANIZATION are expanded.
This level, as expected, shows that here are three additional SARS, filed in 2004, using the same ACCOUNT connected to the other SARs. The investigators determine this change in behavior is due to the SUBJECT trying to layer her transactions through the medical practice so her activities are less "exposed" to government observations. Needless to say, these types of situations provide the investigators and analysts more insight to their targets.
Additional searches in the SAR database do not reveal any more data. However, the investigators check the CTR database and discover a single transaction that occurred in the year 2000.
It was most likely this event that "tipped" her off that the government required forms to be filed for amounts exceeding $10,000. From that point forward, all of her financial transactions were reported as SARs.
This multi-step, multi-source analysis clearly shows how people try to structure their transactions to avoid CTR filing requirements. If large volumes of cash are derived from legitimate purposes (e.g., restaurants, bars, churches, etc.), there should be no concern about depositing or withdrawing the money. The CTR forms are not currently used for tax purposes or any other government oversight other than to help detect and expose money laundering activities. Structuring transactions, providing false information, or trying to avoid CTR filings will result in SAR filings - which are highly scrutinized by governments throughout the world.
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