Saturday, November 29, 2003

Money Laundering

Jane Galt wrote that money laundering laws punish activity that is far removed from any social harm. Mark Kleiman writes in response:
While Jane is right that it would technically be a crime to "structure" transactions to avoid currency reporting even if the purpose of the transactions were entirely licit, the reports themselves are not matters of public record. Therefore there's no actual reason for someone to conceal the cash he spends on his yacht or stamp collection from the IRS, unless he's doing so to conceal the fact that either he, or the recipient of the funds, evaded or intends to evade taxation.
It's not just "technically" a crime to "structure" transactions. It's a crime as real as any other. If you make two cash deposits of $6,000 each within a relatively short time period, and do so with the intent to avoid reporting an over-$10,000 transaction, you could be sentenced to up to five years in jail under 31 U.S.C. 5324. (Make that up to ten years if your cash deposits total more than $100,000 in a one-year period as part of another illegal activity.) So there are some stiff penalties here.

I'm also puzzled by Kleiman's assertion that there is "no actual reason for someone to conceal the cash he spends on his yacht or stamp collection from the IRS." No actual reason? How about privacy? Is it somehow invalid to think that innocent people shouldn't have to report every last detail of their lives to the government merely so that the government can more conveniently identify the few who are criminals? As I've pointed out before, civil libertarians would be up in arms if the Patriot Act were half as intrusive as the law already is with regard to the IRS.

The money laundering law, after all, applies to every instance in which someone structures a transaction so as to avoid reporting; there is absolutely no need to show that there was any other illicit activity (i.e., avoiding taxes, laundering drug money, etc.) unless the prosecutor wants to double the penalty. So if your only purpose was to protect your own privacy, you could in theory face a 5 year jail term (not to mention forfeiture). (Realistically, most prosecutors might use their discretion not to prosecute such a case, but that doesn't change the fact that the statutory penalty is still there.)


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