Laws are like fine nets, catching the common fish even as the biggest push their way through. Or so you might think on learning of how federal prosecutors keep nabbing small and medium-size business people who violate an obscure law relating to bank paperwork, even as the best-known violator of the law so far (a certain well-connected politico named Eliot Spitzer) walks free.
Last month, the feds swooped down on a successful Maryland dairy business, South Mountain Creamery, seizing $70,000 in its bank accounts and formally charging its owners, Randy and Karen Sowers, with the offense of bank “structuring.” Based in Middletown, outside Frederick, South Mountain has thrived as a direct-to-consumer seller at farmer’s markets and other food events in Baltimore and elsewhere around the region. That means it does a lot of cash business, which helped get it in trouble. The feds charged last month that Randy Sowers had been arranging bank deposits so as not to put in more than $10,000 at once, a threshold that triggers the requirement to file paperwork with the feds. There was no allegation that Mr. Sowers was engaged in tax evasion or other underlying illegality, aside from seeking to avoid large deposits.
Few among the general public realize it, but splitting up large bank deposits to avoid the need to file federal reports on them constitutes a criminal offense known as “structuring” under something called the Bank Secrecy Act. The idea is that the reporting requirement helps federal investigators detect some instances of drug money laundering and terrorist finance, and that if a pattern of repeated $9,000 deposits were not also banned, the law would be too easily evaded. In fact, the feds instruct banks to report suspicious patterns of sub-threshold deposits, and not to warn customers that they are doing so. When the Supreme Court ruled in 1994 that the law would not support a conviction unless defendants knew the practice was illegal, Congress promptly passed a bill striking out the willfulness requirement.
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