As a small business owner, you have a lot of paperwork to complete, government regulations to follow, and financial records to maintain. Unless you are engaging in some illegal business on the side, money laundering probably isn’t something that you think about much. Unfortunately, the federal government may be linking your business with these suspicious transactions, and once they suspect you – with or without any evidence of criminal behavior – you could lose everything.
Civil Asset Forfeiture – Legal Extortion
This scenario may seem hard to believe, but there were 639 seizures of cash, called civil asset forfeiture, in 2014 alone. Out of those cases, only a fifth of the businesses targeted were prosecuted criminally. This means that the other four out of five were probably innocent small business owners; eighty percent of the accounts that were seized and emptied into federal accounts belonged to people who were entirely innocent!
The Bank Secrecy Act
This federal practice is protected by a couple of laws that are difficult to overcome. The first is the 1970 Bank Secrecy Act. This law sounds fine on the surface. It requires banks to report any transactions that exceed $10,000. The purpose of the law is to allow the government to recognize criminal activities such as money laundering, illegal gambling, and tax cheating. Criminal organizations responded to this law by “structuring” their deposits in increments just less than $10,000.
Transactions Under or Over $10,000? Could Be Suspicious
Now the law has been revised to require banks to report patterns of transactions just under the ten thousand mark. If you own a small business and regularly move cash amounts under $10,000, your financial institution is required to report you to the federal government. Although you may not even be aware that your transactions look suspicious, your bank is not allowed to alert you to this fact! If you haven’t engaged in any illegal activity, if you handle cash in amounts less than ten thousand, you could lose everything in your bank account to the IRS. According to the Bank Secrecy Act, banks:
- Are prohibited from advising customers that their activities may look like structuring.
- Are prohibited from alerting customers to the fact that they have been reported to the federal government.
- Are required to report transactions exceeding $10,000.
- Are required to report patterns of transactions totaling less than $10,000.
Guilty Even When Innocent
Ultimately, if the IRS determines that civil asset forfeiture is necessary, all of the money in your bank account could be seized. Without the money in your account, however, you may have limited resources for your defense. If you do win, it’s best to expect only part of your money back. Small business owners have struggled to overcome this law. Fortunately, the banks and public interest law firms, such as the Institute for Justice, are also involved in the battle.