Increasingly, the IRS is using civil forfeiture laws and the “Bank Secrecy” act to seize the bank accounts of small businesses. If they suspect a small business has deposited or record their money in an unlawful or untimely manner, they can take your funds.
You’re probably wondering why the federal government is even alerted when there are deposits made in certain sequences. Let me explain how it works…
Federal banking laws require banks to submit reports with the Treasury when there are deposits made in cash exceeding $10,000. Depositing less than that is legal if you have a legitimate reason, but depositing less than $10,000 repeatedly will send a red flag. “Structuring is the practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by the Bank Secrecy Act (BSA) and/or 26 USC 6050I (Form 8300).”
Criminals have been found to do this for the purpose of avoiding the bank generated reports. However, “structuring” laws and regulations are becoming a tool for the IRS to extort money from unsuspecting business owners.
“Structuring”: A Technicality That Makes Money Laundering Legal
Structuring is considered to be a felony by the federal government. If the IRS looks at your bank statements and sees a pattern consistent with structuring, they can seize your funds the same day. With very little investigation, they can essentially shut down your business.
Typically after funds have been wrongfully seized, a lengthy civil case ensues. The seized assets may be returned, however, the legal pursuit could cost upwards of $100,000.
Civil forfeiture law has become one of the most dangerous assaults on private property in existence. It is incredibly easy for the government to take your money solely based on suspicion, and then it is so difficult to get it back. There’s also a financial incentive for agencies that seize your money to be able to pad their budget with the funds.
You can be accused of structuring, and without being charged or taken to trial, all of your assets can be obtained and held until further notice. Keep in mind, these cases take years to settle and can be very costly.
Millionaires To Broke
There was a case in Long Island, where the government seized $446,000 from Bi-County Distributors, Inc. The family-owned business had been running for over 27 years before their life savings was stolen. After 2 1/12 years, the government still hadn’t filed a civil forfeiture action in court. They just refused to return the money and avoided phone calls. As this was a total violation of the owner’s due process rights, and such large amount of money on the table, it attracted a lot of attention. Eventually, the family teamed up with the Institute of Justice and the case went to federal court.
In October 2014, as the case ensued, the IRS announced major changes to structuring laws. They would no longer seize funds based on allegation alone. Unless there was a reason to believe the money was obtained illegally, business owners were safe. In January 2015, the money was returned.
However, the first Civil Asset Forfeiture Reform Act was in 2000. It attempted to solve the practice of governmental seizure of personal property without taking legal action for years.
Modern Civil Forfeiture
Originally, the War on Drugs in the 1980s created an opportunity for authorities to seize a person’s cash and property without charging them with a crime. With corruption and positive reinforcement of certain behaviors of law enforcement, civil forfeiture has grown to affect millions of unsuspecting small business owners.
The average amount seized is $800 and millions of business owners experience civil forfeiture. While criminal forfeiture is used 13% of the time and requires a conviction, civil forfeiture requires no conviction and is used 87% of the time.
Police Cheif Kenneth Burton (Columbia, MO) stated that forfeiture funds go towards “…something that would be nice to have, that we can’t get in the budget for instance. We try not to use it for things we need to depend on… It’s kind of like pennies from heaven that gets you a toy or something you need is the way we look at it.”
Unlike seizing and imprisoning a human being, a piece of property can be seized based on the preponderance of the evidence. If most of the evidence looks like it could be drug money or criminally obtained, it can be seized and taken without a warrant, or criminal charge.
Today, there is a case taking place in Arizona. An elderly couple was found to be growing 14 medical marijuana plants in their garden. The couple is currently facing several federal offenses including a mandatory prison sentence of 4-10 years and seizure and forfeiture of their home, 26 acres of land, vehicles, and all the personal property seized during the raid of their home. The catch here is that the property owner only receives $1,031 a month in social security payments. His ranch is his main source of income.
Based on laws that originated during the War on Drugs in the 1980s, authorities around the country are able to seize a person’s cash and personal property without ever charging them with a crime. Accountability requires you to be proactive and make sure your business isn’t even on the radar for being audited or fined.