$10K Isn't What It Used To Be -- Nor Are Constitutional Rights: Time To Revisit Banking Reporting Requirements
There's a piece by Randall G. Holcombe at FEE about the Currency and Foreign Transactions Reporting Act of 1970. It "requires that financial institutions must keep records of cash transactions summing to more than $10,000 in one day and report suspicious transactions to the federal government."
What's a "suspicious transaction?" Depositing $9,876 from your small business at the end of the week -- because that's what your business happened to earn?
And really, why does the government have any business at all knowing about your money -- sans probable cause (reasonable suspicion that you've committed a crime)?
The fact that you're depositing a sum of money isn't proof of that.
And Holcombe makes the point that $10K in 1970 dollars would be $65K in today's.
Also, consider the Constitution.
To me, the yanking of privacy and the power of the government to take your money are what's really ugly and worrisome about these reporting requirements. Holcombe writes:
I'm not an attorney, but it appears to me the Act violates the Fourth Amendment, which states in part, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated..." The Act constitutes what appears to me to be an unreasonable search.Could a legal challenge be possible? If, when the Act passed, it required reporting of cash transactions exceeding $65,000 in today's dollars, it appears that one could claim that, even if that was reasonable, the $10,000 limit today is not.
Setting aside any legal issues, one hidden cost of inflation is that it makes an increasingly large share of cash holdings and transactions subject to government surveillance.
The government can too easily pry into the financial lives of innocent people and then turn them into its victims -- as they did with this small business owned by three brothers.
That link notes that there have been some changes from the IRS and DOJ since 2014. However, if you look at the "Currency and Foreign Transactions Reporting Act of 1970" link above, you'll see that the government is way up in our money and identity in ways that are dangerous, privacy rights-eating, and frankly, pretty damn creepy.
It’s worse than you think. Every deposit over $1,000 cash is recorded to make sure that you are not hiding your $10,000 deposit in several smaller deposits. Back when I was in banking, they counting the deposits cumulatively, over a week.
On the other hand, I would expect legitimate cash deposits over $10,000 to be quite rare. Who arrives cash anymore, even for small purchases?
Jen at May 17, 2018 5:01 AM
OMG tell me about it.
I can no longer have a safe at my local bank because of my US citizenship... regulations are just too stringent and they'd rather not have that business of mine. I worry that it is just a matter of time until they decide I can't have an account at all.
So we got the safe in my husband's name which means if we go on vacation and I want to put my jewelry or papers it is in a vault I have no access to. Now, I trust my husband, but this still puts me in a very vulnerable position. This puts lots of women in a vulnerable position, in fact, give that it is usually women who follow their husbands to a country (though of course there are exceptions). It's like we're returning to the 1800s where we can't control our own assets and have to ask our husbands permission to get our stuff.
Once when I was back home there was an NPR segment on this and I really wanted to call in and wish I had. I feel like if I played this feminist angle it would resonate with NPR listeners.
NicoleK at May 17, 2018 6:56 AM
Sadly, the 4th Amendment has been a dead letter for quite a while particularly in regard to "administrative law" such as this.
And it's only vaguely alive in criminal matters. All Uncle LEO needs to do is to find a sympathetic judge and get a warrant sworn out using confidential "informants", or just give the high sign to their drug dog to alert.
Instant probable cause.
I R A Darth Aggie at May 17, 2018 7:27 AM
This is so terrible. NicoleK is describing how we're now making it really difficult for Americans in foreign countries -- to the point where banks won't take their accounts (this has happened to many). There are reporting requirements for FATCA, for example, that non-US banks just won't put up with. Easier to just scrub the Americans as customers, leaving them no way to bank their money.
Amy Alkon at May 17, 2018 7:27 AM
PS NicoleK, that's terrible, and you're exactly right about the position it puts women (or any American spouse) in.
Amy Alkon at May 17, 2018 7:28 AM
FATCA extends beyond Americans. Foreigners who work in the US (H-1B visa and such) are also hit. So having assets both in and outside of the US is almost prohibited.
Even in the US you have the situation of Governor Andrew Cuomo of New York where if you do financial business with the NRA you are getting an audit.
https://www.nationalreview.com/news/nra-sues-new-york-over-threats-against-financial-institutions-doing-business-with-group/
What got much less notice is Obama did the exact same thing to the adult film industry among others. So Cuomo has precedent on his side. Operation Chokepoint targeted firearms dealers, pawn shops, payday lenders, and a variety of other 'undesirable' businesses. By flooding banks with investigations they managed to cut those businesses off from all banking services, even simple checking. A classic example of the process being the punishment. Supposedly Trump ended this in 2017. But Obama claimed he had ended it back in 2015 too. So who knows.
All of this is why there really is such a thing as the Keynesian multiplier, and why that multiplier is less than one. For every dollar spent by the government you typically see around a 20% reduction in economic activity.
Ben at May 17, 2018 8:18 AM
The government has been trying for some time to drive us to a cashless economy.
Kinda like gun control, the real criminals operating in the cash economy have sophisticated ways to stay below the radar and launder the cash.
The people that get caught are hapless rubes, and low level dupes of criminal Organizations.
When you get caught getting on a plane to Somalia with 30k plus cash in hand, I think questions need to be asked.
If you are traveling the interstate AND you are an American citizen constitutional protections should apply.
There is a huge huge counterfeiting problem in the world today, and most countries try to protect their currency if they can.
Large amounts of cash are a pretty good tell that you are not engaged in a legitimate business.
http://www.fox9.com/news/investigators/millions-of-dollars-in-suitcases-fly-out-of-msp-but-why
Isab at May 17, 2018 2:00 PM
“This puts lots of women in a vulnerable position, in fact, give that it is usually women who follow their husbands to a country (though of course there are exceptions). It's like we're returning to the 1800s where we can't control our own assets and have to ask our husbands permission to get our stuff.”
It is the exact opposite here in Japan. The wives are overwhelmingly Japanese and the husbands are foreigners.
Isab at May 17, 2018 2:04 PM
Small business owners get caught a lot by this. Their insurance may not even cover them for more than $10,000 in cash, so they have to keep making deposits. The bank is forbidden to tell them about the law and how to abide by it. "Structuring" is making deposits below $10,000 to hide your big deposit--ie lots of smaller deposits, but a small business may just be making regular deposits.
Let's say you sell a car for cash (the only way to sell it) and it is $9,230 and you deposit that. You could be accused of structuring IF some nosy person notices.
cc at May 17, 2018 5:28 PM
"If you are traveling the interstate AND you are an American citizen constitutional protections should apply."
Well - Patrick apparently thinks you only have the right to travel on foot or an animal (that part's clearly wrong). Unless you're a child, I guess, in which case you have {undefined number} of rights except when Daddy wants to take you on an airplane, in which case your five-year-old body being groped is Constitutional and should be.
The biggest problem with "rights" is that nobody bothers to define them - or even recognize which ideas are totally ignored by other humans, not to mention the real world.
(Example: "safe space". No such thing exists, yet many clamor that this is a right to be provided to {name of group, usually students}.)
Radwaste at May 17, 2018 6:14 PM
"On the other hand, I would expect legitimate cash deposits over $10,000 to be quite rare. Who arrives cash anymore, even for small purchases?" Jen
The elderly are much more a cash or check based group of people, and they have cash. So all you need is a business or event catering to a lot of elderly with many smaller (less likely to use checks) purchases. Smaller and rural areas also tend to be more cash based. Any that specialize on holiday or weekend
So large restaurants in older areas or more rural areas, 10K in a week wouldn't surprise me. Church Bazaar, the food tent alone would pull that each day.
Greek and Italian festival this weekend, I'd expect each to hit that in cash each. Charities, how much does a Salvation Army kettle get in a day.
Pay parking lots. Story not long ago about parking attendant skimming from the cash payments so their wouldn't be a record. netted over 1.5 million before they figured it out. That's a lot of cash to deposit. And the banks still didn't notice. http://www.foxnews.com/politics/2013/02/08/smithsonian-parking-lot-thefts-in-virginia-exceeded-1million.html
Joe j at May 17, 2018 9:08 PM
"On the other hand, I would expect legitimate cash deposits over $10,000 to be quite rare. Who arrives cash anymore, even for small purchases?" Jen
The elderly are much more a cash or check based group of people, and they have cash. So all you need is a business or event catering to a lot of elderly with many smaller (less likely to use checks) purchases. Smaller and rural areas also tend to be more cash based. Any that specialize on holiday or weekend
So large restaurants in older areas or more rural areas, 10K in a week wouldn't surprise me. Church Bazaar, the food tent alone would pull that each day.
Greek and Italian festival this weekend, I'd expect each to hit that in cash each. Charities, how much does a Salvation Army kettle get in a day.
Pay parking lots. Story not long ago about parking attendant skimming from the cash payments so their wouldn't be a record. netted over 1.5 million before they figured it out. That's a lot of cash to deposit. And the banks still didn't notice. http://www.foxnews.com/politics/2013/02/08/smithsonian-parking-lot-thefts-in-virginia-exceeded-1million.html “
Your point is exactly? A 10k deposit, easily explained for charities and one off events just triggers a *reporting requirement* nothing more.
If you are a restaurant and have receipts to back up these cash transactions, no problem. What the banks and the feds are looking for are patterns of structuring deposits to evade the reporting requirement which points to money laundering.
Isab at May 17, 2018 9:46 PM
When I executed my father's will, I had to send checks of over $100,000 to my siblings. Both were worried that depositing said checks would trigger a law enforcement inquiry.
My sister talked to her bank and was told that it would be reported, but probably not investigated since it was a check and easily traceable to the source - my father's estate.
It's cash deposits that cause issues. As Isab said, it's a series of untraceable deposits that scream money laundering.
I used to work in a company that facilitated financial transactions, acting as a sort of back office for non-traditional banking. We had to undergo AML and fraud training at least once a year.
Gift cards and reloadable debit or credit cards are a favorite these days for money laundering. The initial transaction is in cash and does not need to be reported. These cards can even be used to smuggle money across the border.
Legal pot shops often use gift cards and reloadable debit cards as a way to store money since they're locked out of traditional banking due to federal drug laws.
Companies often have reward programs that buy blocks of cards as rewards for employees, so a bulk purchase of gift cards might not raise eyebrows. And gift cards can be transported through airports without raising an alarm the way a suitcase full of cash would.
Anti-Money Laundering (AML) efforts are playing catch-up with the money launderers. And, so far, they're losing.
Conan the Grammarian at May 18, 2018 7:41 AM
Evidence of money laundering should be a red flag, not a crime per se. The money laundering statutes were put in place with big drug dealers in mind. Millions of dollars. But most often they catch up honest people or petty crooks.
Isab says cash deposits trigger a reporting requirement only--well technically if you know about it but the bank doesn't have to tell you the law and if you trigger the "structuring" investigation, your receipts don't mean anything. Those running a cash business like examples above probably don't even have decent receipts. In such a case they can seize your bank accounts (like all your money) and you have to get a lawyer to get it back.
cc at May 18, 2018 8:47 AM
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