Structured investments involve a variety of risks. Structured investments may be linked to a wide variety of underlying assets, and each underlying asset will have its own unique set of risks and considerations. For example, some underlying assets have significantly higher volatility than others. Structured deposits are cash based, fixed term deposits where the return of capital at maturity is not dependent on the performance of the underlying(s). Please take a look at our current range of deposit solutions which are open for subscription. Structured products are pre-packaged investments that normally include assets linked to interest plus one or more derivatives. These products may take traditional securities such as an investment. Structured deposits are riskier than normal fixed deposits. You should understand the risks involved and what will happen in a worst-case scenario. If you are unsure, seek financial advice from a professional. As structured deposits are tied to underlying financial instruments such as market indices, equities, interest rates.

Structuring, also known as smurfing in bankingjargon, is the practice of executing financial transactions such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file reports required by law, such as the United States' Bank Secrecy Act (BSA) and Internal Revenue Code section 6050I (relating to the requirement to file Form 8300). Structuring may be done in the context of money laundering, fraud, and other financial crimes. Legal restrictions on structuring are concerned with limiting the size of domestic transactions for individuals.

Definition[edit]

Structuring is the act of parceling what would otherwise be a large financial transaction into a series of smaller transactions to avoid scrutiny by regulators and law enforcement.^[1] Typically each of the smaller transactions is executed in an amount below some statutory limit that normally does not require a financial institution to file a report with a government agency. Criminal enterprises may employ several agents ('smurfs') to make the transaction. Structuring appears in federal indictments related to money laundering, fraud, and other financial crimes.

The term 'smurfing' is derived from the image of the comic book characters, the Smurfs, having a large group of many small entities. Miami-based lawyer Gregory Baldwin is said to have coined the term in the 1980s.^[2]

Regulations[edit]

United States[edit]

In the United States, the Bank Secrecy Act requires currency transaction reports (CTRs) to be filed for transactions valued at more than $10,000; it applies to both U.S. and foreign currencies.^[3] Financial institutions suspecting deposit structuring with intent to avoid the law are required to file a suspicious activity report (SAR).^[4] In 1986, the U.S. Congress enacted section 5324 of Title 31 of the United States Code,^[5] which provides (in part):

No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—[...](3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.

Section 5324 further provides that a violation of this provision may be punished by a fine or up to five years in prison, or both.^[6] The filing of Form 8300 is required under Internal Revenue Code section 6050I.^[7]

Sums of money resulting from deposits of less than $10,000 may be seized after a warrant is issued based on a suspicious activity report. Legal proceedings, which may cost in the vicinity of $20,000 or more, may be required for an innocent party to retrieve his or her money. Reports in October 2014 by The New York Times of arbitrary seizures resulted in modification of Internal Revenue Service (IRS) practice to focus on investigations that 'closely align' with IRS 'mission and key priorities'. Banks are not permitted to warn or advise customers unless the customer asks, but sometimes bank tellers will informally warn customers.^[8]

Outside the United States[edit]

Other uses[edit]

The term 'smurfing' is also applied to activity associated with controlled substances such as pseudoephedrine.^[18] In this context, the agent will make purchases of small, legal amounts from several drug and grocery stores, with the intent to aggregate the lot for use in the illegal production of methamphetamine.^[18] Also, since the monthly pseudoephedrine purchase limits in US are too low for mass meth production, this practice often involves using multiple 'smurfs'.

As Robert Pennal of the Fresno Meth Task Force explains:

Then we started seeing 'smurfing.' Remember how the smurfs were little gatherers? We started getting calls from different retail stores that people were buying two or three packs—that's the most you can buy—and they went to one store, they bought three, they went to another store, bought three. We're seeing blister packs everywhere because they're sitting in the car, they're punching the pills out of the blister packs, they're putting them in the freezer bags and they're turning them over to chemical brokers.^[19]

See also[edit]

References[edit]

1. ^Linn, Courtney J. (2010). 'Redefining the Bank Secrecy Act: Currency Reporting and the Crime of Structuring'. Santa Clara Law Review. 50 (2): 407–513.
2. ^Gross, Samantha; Barrett, Devlin (11 March 2008). 'Spitzer Tripped Up on Laws He Enforced'. Fox News. Archived from the original on 22 March 2008. Retrieved 14 March 2008.
3. ^See generally 31 U.S.C.§ 5313, 31 U.S.C.§ 5324, 31 C.F.R. sec. 1010.311, and 31 C.F.R. sec. 1010.314.
4. ^See generally 31 C.F.R. sec. 1010.320.
5. ^See section 1354(a) of the Anti-Drug Abuse Act of 1986, Public Law No. 99-570, 100 Stat. 3207, at 3207-22 (27 October 1986).
6. ^See 31 USC section 5324(d)(1).
7. ^Internal Revenue Service (1 June 2006). 'Part IV Examining Process; Chapter 26 Bank Secrecy Act; Section 13 Structuring'. Internal Revenue Manual. Washington, D.C.: US Treasury Department. OCLC37305546. Retrieved 11 March 2008.
8. ^'Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required' article by Sahaila Dewan in The New York Times 25 October 2014
9. ^Australian Transaction Reports and Analysis Centre (September 2002). 'AUSTRAC Guideline No. 1: Suspect Transaction Reporting'(.PDF). Financial Transaction Reports Act 1988. Government of Australia. Retrieved 12 March 2008.
10. ^Conselho de Controle de Atividades Financeiras. 'Lavagem de Dinheiro' (in Portuguese). Ministério da Fazenda. Archived from the original on 3 July 2007. Retrieved 12 March 2008.
11. ^'Guideline 9: Alternative to Large Cash Transaction Reports to FINTRAC'. fintrac.gc.ca.
12. ^'§ 10 GwG - Einzelnorm'. www.gesetze-im-internet.de. Retrieved 26 May 2019.
13. ^http://www.antimoneylaundering.gov.ie/website/aml/amlcuweb.nsf/0/B75E0654ED35762480257F230043F9FE/$File/2014%20Report.pdf
14. ^Dipartimento del Tesoro. 'Antiriciclaggio' (in Italian). Ministero dell'Economia e delle Finanze. Archived from the original on 15 March 2008. Retrieved 12 March 2008.
15. ^FIU-Nederland. 'Meldingen Ongebruikelijke Transacties' (in Dutch). Ministerie van Justitie. Retrieved 12 March 2008.
16. ^Europa Taxation & Customs Union (21 December 2007). 'Cash controls'. European Commission. Retrieved 12 March 2008.
17. ^Netipoom Maysakun. 'MONEY LAUNDERING IN THAILAND'(PDF). The United Nations Asia and Far East Institute for the Prevention of Crime and the Treatment of Offenders. Retrieved 15 September 2008.
18. ^ ^ab'DEA'(PDF). Justice.gov. p. 16. Archived from the original(PDF) on 17 October 2010.
19. ^'Transcript – The Meth Epidemic'. Frontline – PBS.

External links[edit]

Cody deposits $9,500 in small bills. That is okay. But depositing $9,500 with the “purpose of evading the currency transaction reporting requirement' is a crime called structuring. The Internal Revenue Service reminded businesses that they must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, when they engage in cash transactions in excess of $10,000.

Examples of businesses that may have to file Form 8300 include those that sell jewelry, furniture, boats, aircraft, or automobiles, as well as those that are pawnbrokers, attorneys, real estate brokers, insurance companies and travel agencies.

The law also requires that businesses report related transactions occurring within a 24-hour period. If the same payer makes two or more transactions totaling more than $10,000 in a 24-hour period, the business must treat the transactions as one transaction and report the payments. These laws are part of the Bank Secrecy Act, discussed below.

Structuring: Structuring transactions to evade BSA (Bank Secrecy Act) reporting and certain recordkeeping requirements can result in civil and criminal penalties under the BSA. Under the BSA , no person shall, for the purpose of evading the CTR (Currency Transaction Reporting) :
• Cause or attempt to cause a bank to fail to file a CTR or a report required under a geographic targeting order or to maintain a record required under BSA regulations.
• Structure, as defined below, or attempt to structure or assist in structuring, any transaction with one or more banks.

The definition of structuring states, 'a person structures a transaction if that person, acting alone, or in conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the [CTR filing requirements].' 'In any manner' includes, but is not limited to, breaking down a single currency sum exceeding $10,000 into smaller amounts that may be conducted as a series of transactions at or less than $10,000. The transactions need not exceed the $10,000 CTR filing threshold at any one bank on any single day in order to constitute structuring.

The purpose of these laws is to limit criminal business activity conducted in cash – money laundering, drugs, criminal enterprises, etc. However, these laws can create potential problems for “law abiding” Americans, as well as hardened and white collar criminals. The IRS has seized assets (cash and bank account deposits) under suspicion of structuring. It then falls on the taxpayer to prove that the funds and deposits are legitimate. Even in the cases where taxpayers prevail, there is tremendous time and expense defending themselves.

South Mountain Creamery
Dairy farmers Randy and Karen Sowers, who who have owned South Mountain Creamery in Middletown, Md. for more than three decades had Treasury officials show up at their farm in February 2012 to question them about bank deposits under $10,000. They learned that the federal government had just seized approximately $70,000 in their bank account. The only crime they are accused of is structuring. They have since reached a settlement with the government and are required to forfeit close to $30,000. The Sowers are apparently not drug dealers – just daily farmers.

Dennis Hastert

As reported yesterday, Dennis Hastert (former Speaker of the House) was indicted by a grand jury on charges of structuring and lying to the FBI.

Other examples of structuring are below. As mentioned, these laws are intended to restrict the activities of criminals.

California Man Sentenced for Structuring Cash Deposits
On July 21, 2014, in Bakersfield, California, Miguel Antonio Ruiz Jaramillo was sentenced to 12 months in prison and ordered to pay $91,527 in unpaid federal taxes. According to court documents, from January 2010 through July 2012, Jaramillo cashed more than fifty checks in amounts of $10,000 or less at a bank located in Bakersfield, totaling more than $420,000. Jaramillo had the checks cashed in this manner to prevent, or attempt to prevent, the bank from filing a currency transaction report on those transactions. He did not want a report filed because for the years 2010 and 2011, he did not declare the structured cash transactions as income on his federal tax returns.

Structured Deposit Products

Doctor Sentenced for Tax Evasion and Currency Structuring
On April 28, 2014, in Macon Ga., Robert Sperrazza, M.D., formerly a resident of Lee County, Georgia, was sentenced to 36 months in prison and ordered to forfeit $870,238 to the United States. Sperrazza was convicted by a jury on June 7, 2013 of three counts of tax evasion and two counts of currency structuring. According to trial evidence, Sperrazza personally cashed over one million dollars in patient checks at the counter of a local bank, in Albany, Georgia. Sperrazza structured the cash transactions in amounts under $10,000 for the purpose of evading the bank reporting requirements of federal law and for the purpose of furthering his tax avoidance scheme. Sperrazza was formerly an anesthesiologist in Albany, Georgia. He later moved to Panama City Beach, Florida where he briefly operated a pain clinic. Sperrazza is not currently involved in the practice of medicine.

Man Sentenced for Making and Selling Bootlegged DVDs and CDs
On Aug. 27, 2014, in Hartford, Connecticut, John W. Rice, of Windsor, was sentenced to 18 months in prison, three years of supervised release. In addition, Rice forfeited $48,195 seized from his bank account, a 2005 Chevrolet Corvette and a 2012 BMW 650i. On April 25, 2014, Rice pleaded guilty to one count of criminal copyright infringement and one count of money laundering. According to court documents, between 2000 and 2013, doing business as “Dr. Jay’s Entertainment,” Rice manufactured copies of motion pictures, television shows, and music that were copyrighted works, using recordable blank DVDs and CDs. Rice displayed and sold the bootlegged merchandise in a variety of locations and advertised and sold the materials over the internet. A total of 8,913 DVDs and 11,410 CDs were seized from Rice and Dr. Jay’s Entertainment. Rice also structured cash deposits into his bank account. In November 2012, Rice withdrew from his account $39,237 in cash derived from his criminal activity in order to purchase a cashier’s check payable to BMW of West Springfield.

Georgia Man Sentenced for Investment Fraud Scheme
On June 25, 2014, in Peoria, Illinois, Kenneth Lewis of Augusta, Georgia and Cranford, New Jersey, was sentenced to 271 months in prison and ordered to pay $5,565,406 in restitution. Lewis was convicted of four counts of wire fraud and 11 counts of money laundering. According to court documents, beginning in the late 1990s, Lewis offered investors the ability to generate income through highly secretive overseas financial transactions. He obtained more than $5.5 million from victims to cover his living expenses while he was purportedly working on completing the details of non-existent transactions. Lewis told investors that he had been living in Zurich, Switzerland for seven years working on the transaction, when, in fact, he was living in a hotel in New Jersey, where he was arrested in July 2012.

Structured Deposit Illegal

How to Avoid Structuring?

Structuring Money Means

Certainly one of the best ways is to simply not do it. For those that have a cash business, it is important to build a relatiohship with the bank so the bank understands that the daily deposits (under $10,000) is not structuring, but rather normal operations. It is more than a little frightening to think that a teller who does not know you can create serious problems when you are really just conducting a legitimate business.