When It’s a Crime to Withdraw Money From Your Bank

Dennis Hastert has not been indicted on a charge of sexual abuse, nor has he been indicted on a charge of paying money he was not legally allowed to pay. The indictment of Mr. Hastert, a former House speaker, released last week, lays out two counts: taking money out of the bank the wrong way, and then lying to the F.B.I. about what he did with the money.

Does that make sense? Conor Friedersdorf of The Atlantic, for example, is worried that the indictment constitutes government overreach, punishing Mr. Hastert for concealing payments whose disclosure he may have thought would be damaging to his reputation, but which were not illegal.

Federal prosecutors allege Mr. Hastert was paying hush money in exchange for wrongdoing that happened long ago. But Mr. Hastert is charged with structuring: making repeated four-figure cash withdrawals from his bank in order to avoid the generation of cash transaction reports, which banks are required to send the government about every transaction over $10,000. These reports have been required since 1970, with the intention of helping the federal government identify organized criminals and tax evaders.

Photo

Dennis Hastert in 2007, the year he announced his plans to retire from the House.CreditBrendan Smialowski for The New York Times

To be clear: It’s not illegal simply to take $8,000 out of the bank repeatedly.

“The criminal provisions there do have strong mens rea (criminal intent) requirements: The government has the burden to prove that the defendant knew about the reporting requirement and intended to evade it,” said Jim Copland, who directs the Center for Legal Policy at the Manhattan Institute, a right-of-center think tank. “So this is quite unlike many of the regulatory crimes that can ensnare the unsophisticated.”

“Whether a former House Speaker who presided over the Patriot Act’s enactment can show absence of mens rea here, of course, may be doubtful,” he added.

Prosecutions for structuring without any charge of an underlying offense with the money are not unusual, said Peter Djinis, a lawyer focusing on laws against money laundering, who until 2002 was executive assistant director for regulatory policy at the Financial Crimes Enforcement Network, the arm of the Treasury Department that enforces these rules.

“In many cases, the most attractive route to take when you can’t prove the underlying crime is to go with the activity that’s in front of you,” Mr. Djinis said.

Of course, that’s exactly the sort of prosecutorial approach Mr. Friedersdorf is worried about, since it assumes the existence of an underlying crime. As he notes, a person who engages in structuring because of “a simple aversion to being monitored,” despite having no intention of using the money for an illegal purpose, is committing a crime.

And over time, the size of the transaction you can make without the government watching has fallen in real terms. The reporting threshold has not been raised since the Bank Secrecy Act was passed in 1970, and $10,000 today is equivalent to just $1,640 in 1970 dollars. Actions by Congress have also tightened the rules around moving cash: Congress banned structuring in 1986, started requiring banks to report smaller-but-still-suspicious transactions in 1992, and added further reporting requirements in the Patriot Act, under Mr. Hastert’s watch.

With the reporting threshold having fallen so much in real terms, about 15 million cash transaction reports are filed annually for transactions over $10,000, plus about 1.6 million reports of otherwise suspicious activity, often for cash transactions below $10,000.

Still, privacy concerns need to be balanced with the entirely valid purpose of anti-money-laundering laws, that is, disrupting the activities of illegal businesses and tax evaders. Even in this case, there is a tax angle: Large cash transactions that go unnoticed by the government might go unreported to the Internal Revenue Service.

Paul Caron, a tax law professor at Pepperdine University, noted that the person who was paid money by Mr. Hastert may have owed income tax on the payments, whether they constituted a settlement, extortion or something else. Yes, even proceeds from extortion are taxable income; there was a Supreme Court case about the matter in 1952.