Did you know that small business owners can be prosecuted for making repeated cash deposits of under $10,000? Randy and Karen Sowers, owners of a successful Maryland creamery, learned that accounting detail the hard way when the federal government seized $62,936 from their company’s bank account and charged them with violating the Bank Secrecy Act. The Sowers did not intend to violate the law. The couple simply found themselves caught in a net of federal prosecution because their everyday business practices and ignorance of obscure banking laws ran afoul of a federal statute.
Unfortunately, their story has become all too common. With the eruption of federal regulations, it has become all but impossible for business owners to keep track of potential violations, causing many to inadvertently breach public policy. Unless Congress wants a market where entrepreneurs risk imprisonment and fines to start a business, then it needs to inject a little common sense into the law by simplifying regulations and eliminating strict liability.
The Sowers’ troubles began after they made nearly three-dozen deposits into their company’s bank account, each totaling just under $10,000. Although any fan of nighttime criminal dramas can tell you that a $10,000 cash deposit triggers a federal reporting requirement, few recognize that an attempt to avoid the additional paperwork by breaking the sum into smaller transactions—what the government calls “structuring”—is illegal. Moreover, Congress eliminated ‘willfulness’ as an element of the crime, making a pattern of suspicious transactions sufficient for prosecution. The fact that the Sowers primarily run a cash business at local farmers’ markets and make a steady stream of income did not save them from settling the case and forfeiting half of what was seized.
Now, the ban on “structuring,” unlike many federal regulations, actually has an obvious and necessary role in thwarting crime. The reporting requirement helps federal investigators flush out money laundering, tax evasion, and terrorist financing. If a pattern of repeated smaller deposits were not also banned, the law would be too easily skirted.
But, as with many well-intended regulations, the ban picks up innocent conduct that happens to coincidentally mimic signs of criminal behavior, as it did with the Sowers. You might then assume that in the absence of some other criminal activity the government would be happy to limit itself to an investigation and decline to prosecute “structuring” as a standalone offense. You would be wrong. Federal prosecutors have seized hundreds of thousands of dollars from otherwise lawful businesses because they just happen to generate the wrong amount of money. The transactions alone were enough to seize private assets and, in the Sowers’ case, force business owners to forfeit a portion of their legally earned income.
The government justifies these seizures with the old maxim “ignorance of the law is no excuse.” The government is absurd. With over 300,000 federal regulations, another 4,000 criminal statutes, not to mention state laws and creative interpretations, the law no longer criminalizes blameworthy conduct alone. The government has made it impossible for ordinary citizens to discern the law through common sense.
Instead, the public is forced to rely on a prosecutor’ good judgment—something that seems to be sorely lacking if the Sowers’ experience is anything to go by. The public cannot rely on bureaucrats to respond appropriately when the innocent are inadvertently ensnared by federal regulations.
Nor should they have to. Our Constitution established a system of laws, not men with discretion. Individuals have a right both to their property and to the security of conducting ordinary business without the fear of a judge’s gavel. Thus, Congress needs to impress principled limits to the law’s reach either by repealing some of the excess regulation or, in the case of purposeful laws like “structuring,” introducing some mental requirement so that the unwary are not as likely to find themselves in handcuffs as the guilty.
Randy and Karen Sowers did not deserve to have their hard earned income seized by government bureaucrats. Congress needs to take action lest we become a society where entrepreneurs will fear the law the same way they will fear doing business.
Kathleen Hunker is a graduate of Columbia University School of Law. She also has an LL.M. in Public Law and Human Rights from the University College London.