25.00 TAX MONEY LAUNDERING

Updated June 2001

25.01 26 U.S.C. § 6050I -- RETURNS RELATING TO CASH RECEIVED IN 

TRADE OR BUSINESS (FORMS 8300)

25.01[1] Statutory Language:  26 U.S.C. § 6050I

25.01[2] Treasury Regulations:  26 C.F.R.

25.01[3] Attorney Fee Reporting

25.01[4] Criminal Prosecution: Failing to File Correct Forms; Structuring to 

Evade Reporting

25.01[4][a] Duty To File Correct Forms 8300 -- WILLFULNESS

25.01[5] Sentencing

25.01[6] Venue

25.01[7] Statute of Limitations

25.01[8] Policy and Procedure

25.01[8][a] Tax Return Disclosure

25.02 18 U.S.C. § 1956(a)(1)(A)(ii) -- LAUNDERING OF MONETARY INSTRUMENTS

25.02[1] Statutory Language: 18 U.S.C. § 1956(a)(1)(A)(ii)

25.02[2] Generally

25.02[3] Elements

25.02[4] Conduct Financial Transaction

25.02[5] Knowledge

25.02[6] Proceeds of Specified Unlawful Activity

25.02[7] Intent to Evade Tax or Commit Tax Fraud

25.02[9] Venue

25.02[10] Statute of Limitations

25.02[11] Policy and Procedure

---

      The focus of this chapter is limited to tax-related money laundering

involving 26 U.S.C. § 6050I -- Returns Relating to Cash Received in a Trade

or Business -- and 18 U.S.C. § 1956(a)(1)(A)(ii) -- Laundering of Monetary

Instruments.  The Asset Forfeiture and Money Laundering Section of the Criminal

Division has published a comprehensive reference guide on money laundering

entitled Federal Money Laundering Cases (January 1999).

      In addition, prosecutors interested in obtaining further information on

money laundering in general, and authorization and consultation requirements in

particular, should consult the United States Attorneys' Manual (USAM),

Sections 9-105.000, 9-105.300 and 9-105.750 (September 1997).  Attention is also

directed to Tax Division Directive No. 99, dated March 30, 1993, (a copy of which

is included in Section 3 of this Manual).  Tax Division authorization is required

before a money laundering charge may be brought where the specified unlawful

activity is based on a violation arising under the internal revenue laws.

---

       25.01  26 U.S.C. § 6050I -- RETURNS RELATING TO CASH

              RECEIVED IN TRADE OR BUSINESS (FORMS 8300)

25.01[1]  Statutory Language:  26 U.S.C. § 6050I

      Section 6050I.  RETURNS RELATING TO CASH RECEIVED IN TRADE OR

      BUSINESS

      (a)  Cash Receipts of More Than $10,000.--Any person--

      (1)  who is engaged in a trade or business, and

      (2)  who, in the course of such trade or business, receives more than

      $10,000 in cash in 1 transaction (or 2 or more related transactions),

      shall make the return described in subsection (b) with respect to such

      transaction (or related transactions) at such time as the Secretary [of

      the Treasury] may by regulations prescribe.

      (b)  Form and Manner of Returns.--A return is described in this

      subsection if such return--

      (1)  is in such form as the Secretary may prescribe,

      (2)  contains

            (A)   the name, address, and TIN (taxpayer identification number) of

                  the person from whom the cash was received,

            (B)       the amount of cash received,

            (C)       the date and nature of the transaction, and

            (D)      such other information as the Secretary may              

            prescribe.

      (c)  Exceptions.--

      (1)  Cash received by financial institutions.--Subsection (a) shall

      not apply to--

            (A)  cash received in a transaction reported under title 31, United

            States Code, if the Secretary determines that reporting under this

            section would duplicate the reporting to the Treasury under title

            31, 

United States

 Code, or

            (B)  cash received by any financial institution (as defined in

            subparagraphs (A), (B), (C), (D), (E), (F), (G), (J), (K), (R), and

            (S) of section 5312(a)(2) of title 31, United States Code).

      (2)  Transactions occurring outside the United States.--Except to

      the extent provided in regulations prescribed by the Secretary, subsection

      (a) shall not apply to any transaction if the entire transaction occurs

      outside the 

United States

.

      (d)  Cash Includes Foreign Currency and Certain Monetary

      Instruments.--For purposes of this section, the term "cash" includes--

      (1)  foreign currency, and

      (2)  to the extent provided in regulations prescribed by the Secretary,

      any monetary instrument (whether or not in bearer form) with a face amount

      of not more than $10,000.

      Paragraph (2) shall not apply to any check drawn on the account of the

      writer in a financial institution referred to in subsection (c)(1)(B).

      (e)  Statements to be Furnished to Persons With Respect to Whom

      Information is Required.--Every person required to make a return under

      subsection (a) shall furnish to each person whose name is required to be

      set forth in such return a written statement showing--

      (1)  the name, and address, and phone number of the person required to

      make such return, and

      (2)  the aggregate amount of cash described in subsection (a) received by

      the person required to make such return.

      The written statement required under the preceding sentence shall be

      furnished to the person on or before January 31 of the year following the

      calendar year for which the return under subsection (a) was required to be

      made.

      (f)  Structuring Transactions to Evade Reporting Requirements

      Prohibited.--

      (1)  In general.--No person shall for the purpose of evading the

      return requirements of this section--

            (A)   cause or attempt to cause a trade or business to fail to file

                  a return required under this section,

            (B)   cause or attempt to cause a trade or business to file a return

                  required under this section that contains a material omission

                  or misstatement of fact, or

            (C)   structure or assist in structuring, or attempt to structure or

                  assist in structuring, any transaction with one or more trades

                  or businesses.

      (2)  Penalties.--A person violating paragraph (1) of this

      subsection shall be subject to the same civil and criminal sanctions

      applicable to a person which fails to file or completes a false or

      incorrect return under this section.

25.01[2]  Treasury Regulations:  26 C.F.R.

      As referred to in 26 U.S.C. § 6050I, the Secretary of the Treasury has

promulgated Treasury Regulations to implement the statute, as it is not

self-executing.  The regulations can be found at 26 C.F.R. § 6050I-1 and

26 C.F.R. § 6050I-2, respectively.  

      The final regulations, filed in September of 1986, cover reporting

requirements for the receipt of cash payments generally, as well as circumstances

when cash is received for the account of another, by agents, or in the form of

multiple payments.  For amounts received prior to February 3, 1992, "cash" is

defined by these regulations as "the coin and currency of the United States or

of any other country, which circulate in and are customarily used and accepted

as money in the country in which issued."  For amounts received after February

3, 1992, the term "cash" also means (in addition to the language above) : "A

cashiers' check (by whatever name called, including 'treasurer's check'  and

'bank check'), bank draft, traveler's check, or money order having a face amount

of not more than $10,000."  Treas. Reg. § 1.6050I-1(c)(1) (26 C.F.R.)

(hereinafter "26 C.F.R. §").  In addition, "trade or business" (26 C.F.R.

§ 1.6050I-1(c)(6)), "transaction" (26 C.F.R. § 1.6050I-1(c)(7)(i)),

"related transactions" (including a specific example involving a criminal

attorney being paid in a criminal case) (26 C.F.R. § 1.6050I-1(c)(7)(ii)),

and "recipient" (26 C.F.R. § 1.6050I-1(c)(8)) are defined in the

regulations.  

      Exceptions to the reporting requirements are also included and cover cash

received by certain financial institutions (as set out in the statute itself),

as well as additional exceptions for casinos under various specified

circumstances, cash receipts outside the course of a trade or business, and

transactions that occur entirely outside the United States, Puerto Rico, or

any U.S. possession or territory. [FN1] 

      The regulations also prescribe the time, manner, and form of reporting. 

Form 8300, the reporting document required to be completed by a payee in order

to comply with section 6050I, must be filed with the Internal Revenue Service

within 15 days of the receipt of payment or within 15 days of the payment which

causes the aggregate amount to exceed $10,000. (26 C.F.R. §1.6050I-1(e)(1).) 

      Further, a payee required to file a Form 8300 with the Service must also

furnish a notice ("statements") to the payer named therein.  The statement must

be provided to the payer on or before January 31 of the calendar year following

the year in which the cash is received.  (26 C.F.R. § 1.6050I-1(f).) 

Payments Received After December 31, 1989:

      The temporary regulations (26 C.F.R. §1.6050I-1T), enacted in July of

1990, pertain to cash payments received after December 31, 1989.  They require

persons obligated to make reports under the final regulations (above) to make

additional reports each time subsequent cash payments are received within a

one-year period for the same transaction or related transactions resulting in an

aggregate amount over $10,000.  Previously, an additional report was only

required when a single subsequent payment exceeded $10,000.  The temporary

regulations also set forth the time period within which such a report must be

made. 

      To the extent that they are not inconsistent with these temporary

regulations, the final regulations remain applicable to cash payments received

after 1989.

Payments Received On or After February 3, 1992:

      As noted above, all payments received on or after February 3, 1992, are

governed by final regulations which came into effect on that date.  Under these

regulations, the definition of "cash" for purposes of section 6050I is

significantly broadened in particular instances to include cashier's checks, bank

drafts, traveler's checks, and money orders, so long as they have face values of

not more than $10,000. (26 C.F.R. § 1.6050I-1(c)(1)(ii).)  

      These specified monetary instruments are to be treated as cash only in

retail sales of consumer durables, collectibles, in travel or entertainment

activity, or in any transactions in which the recipient knows that the instrument

is being used to avoid the reporting requirements of section 6050I. (26 C.F.R.

§1,6050I-1(c)(1)(ii)(B).)  The regulations also provide exceptions to

treating the monetary instruments as cash when they are received in certain

installment sales, certain down payment plans, or when documentation shows the

instruments to be the proceeds of a bank loan.   However, certain specified

conditions must be met and examples are given. 

25.01[3]  Attorney Fee Reporting

      Attorneys are not excepted from the reporting requirements of section

6050I.  Neither the statutory exceptions nor the Treasury Regulations defining

them provide any such exclusion.  To the contrary, 26 C.F.R.

1.6050I-1(c)(3)(iii), example (2), illustrates, through the use of a hypothetical

situation, a transaction in which the lawyer's obligation to file a Form 8300

would arise.  In the hypothetical, an attorney represents a client in a criminal

case, and ultimately, receives an aggregate fee of $12,000, which the client pays

in cash.  The regulations specifically state, at the end of example (2), that

this "receipt of cash must be reported under this section."

      Because the Treasury Regulations were promulgated pursuant to an express

delegation of statutory authority, they are "legislative regulations" and are,

therefore, entitled to considerable weight in the courts, and unless inconsistent

with the statute, have the "force and effect of law."  Maryland Casualty Co.

v. United States, 251 U.S. 342, 349 (1920); Allstate Insurance Co. v.

United States, 329 F.2d 346, 349 (7th Cir. 1964).  See also

United States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982).

      In response to incomplete Forms 8300 filed by law firms, the Internal

Revenue Service has served summonses on numerous firms since early 1990, seeking

the information necessary to complete the forms.  The Supreme Court has

specifically held that, because Congress has delegated the power to promulgate

all needful rules and regulations for the enforcement of the Internal Revenue

Code, the regulatory interpretations of the Code will be deferred to so long as

they are reasonable.  Treasury regulations and interpretations which have endured 

without substantial change, and which apply to unamended or substantially

reenacted statutes, are deemed to have received congressional approval and have

the effect of law.  Cottage Sav. Ass'n v. Commissioner, 499 U.S. 554, 560-

561, (1991); Jeppsen v. Commissioner, 128 F.3d 1410, 1417 (10th Cir.

1997).  See Maryland Casualty Co., 251 U.S. at  349 (A regulation

by a department of government has the force and effect of law if it is not in

conflict with an express statutory provision.); Allstate Insurance Co.,

329 F.2d at 349.  See also Vogel Fertilizer Co., 455 U.S.

at  24.

      Despite their duty to file under section 6050I and the pertinent Treasury

Regulations, some attorneys have either filed incomplete Form 8300 or ignored the

reporting requirement altogether.  These attorneys claim that the mandated

disclosures violate the attorney-client privilege, the First  Amendment, the

Fourth Amendment, the Fifth Amendment, and the attorney-client relationship

guaranteed by the Sixth Amendment.  The Department of Justice has concluded,

however, that there is no legal or policy reason to justify an exemption for

attorneys from the reporting requirements.  In response to incomplete Forms 8300

filed by law firms, the Internal Revenue Service has served numerous summonses

on law firms since early 1990, seeking the information necessary to complete the

forms.  Attorneys in some circuits have made the argument that this type of

summons constitutes a John Doe Summons because the IRS's purpose is to obtain

information about an unknown third party and should be required to follow the

necessary procedures to obtain such a summons.

John Doe Summons

      The IRS is empowered to serve a summons on any person from whom it seeks

information believed necessary to ascertain that person's tax liability.  26

U.S.C. § 7602(a).  If, however, the IRS seeks information regarding the

potential tax liability of an unnamed taxpayer, it may not summarily issue a

summons, but must follow the procedures laid out in 26 U.S.C. § 7609.  If

the unnamed taxpayer is known to the IRS, it must provide him or her with notice

and opportunity to intervene pursuant to 26 U.S.C. § 7609(a) and (b).  Where

the IRS does not know the identity of the taxpayer under investigation, it must

obtain judicial approval pursuant to § 7609(f) prior to issuing a summons. 

A summons issued pursuant to § 7609(f) is known as a "John Doe summons." 

To create a prima facie case for validating the summons, the IRS must show

that the investigation has a legitimate purpose, that the inquiry is relevant to

that purpose, that the information sought is not already in the possession of the

IRS, and that it followed all requisite administrative steps.  United States

v. Blackman, 72 F.3d 1418, 142 (9th Cir. 1995).

      Law firms in several circuits have challenged summonses requesting the Form

8300 information on the grounds that the IRS was required to obtain prior

judicial approval pursuant to § 7609(f).  Courts tend to look at the motive

behind the request to determine whether the IRS is requesting the information to

investigate the law firm, or whether the IRS is requesting the information to

investigate unknown third parties.  The circuits which have addressed this issue

have been split on whether or not to require a John Doe summons, but the courts

look at  the facts surrounding the investigation to make a determination.

      A district court in the First Circuit noted that omission of the identity

of the client on Forms 8300 was immaterial to the law firm's tax liability and,

therefore, the contention that the IRS was investigating the law firm was not

credible.  As a result, procedures for obtaining a John Doe summons were

required.  United States v. Gertner, 873 F. Supp. 729, 734 (D.Mass. 1995). 

In the Sixth Circuit, the court found that where the IRS had no bona fide

interest in the law firm's tax liability, but rather was interested in the

identity of the payer,  the summons was to be treated as a John Doe summons.  If

the IRS cannot demonstrate bona fide interest in investigating the tax liability

of the party summoned, it must comply with § 7609(f).  United States v.

Ritchie, 15 F.3d 599, 599-600 (6th Cir. 1994).

      The Ninth Circuit did not require a John Doe summons in United States

v. Blackman, 72 F.3d 1418, 1423 (9th Cir. 1995), despite the

respondent's argument that the IRS was not really seeking information about his

clients, and was not seriously investigating him or his law firm at all.  The

respondent contended that the information sought by the IRS did not have any

relevance to any legitimate investigation of him or the firm, and urged the court

to find that the IRS was required to follow John Doe procedures.  The Ninth

Circuit noted that in Tiffany Fine Arts v. United States, 469 U.S. 310,

316-317,  (1985), the Supreme Court held that, even where the IRS admits it has

a "dual motive" (where the investigation is aimed at unnamed as well as named

persons), a John Doe summons is not required so long as the trial court

determines as a matter of fact that the IRS's investigation of the named party

is legitimate.  Based on the holding in Tiffany, the court of appeals

affirmed the district court's decision and held that the investigation of the

firm was legitimate and, thus, did not require a John Doe summons. 

Blackman, 72 F.3d at 1422-1423.

      The courts have held that, except in a case of special circumstance

(discussed below), client identity and payment of fees are not privileged

information.  Gertner, 873 F.Supp. at 734.  United States v.

Goldberger, 935 F.2d 501, 505 (2d Cir. 1991) (Absent special circumstances,

the identification in Form 8300 of respondents' clients who make substantial cash

fee payments is not a disclosure of privileged information.); In re Grand Jury

Matter, 926 F.2d 348, 351 (4th Cir. 1991); Ritchie, 15 F.3d at 602;

United States v. Sindel, 53 F.3d 874, 876 (8th Cir. 1995) (attorney-client

privilege protecting confidential disclosures ordinarily does not apply to client

identity and fee information);  Blackman, 72 F.3d at 1424 (absent

extraordinary circumstances); In re Grand Jury Subpoenas (Anderson), 906

F.2d 1485, 1488 (10th Cir. 1990); United States v. Leventhal, 961 F.2d

936, 940 (11th Cir. 1992).

      An attorney in the Sixth Circuit made the argument that attorneys should

not be forced to comply with section 6050I because consultation with counsel

cannot constitutionally be used to establish a reasonable basis for believing

that a client has failed to comply with internal revenue laws.  The Sixth Circuit

rejected this argument and noted that the suspect act is paying over $10,000 in

cash for anything--in this case legal services.  The IRS's investigation has

nothing to do with the client's choice of attorney; it has everything to do with

how the client paid for the services of his attorney.  There is no reason to

grant law firms a potential monopoly on money laundering simply because their

services are personal and confidential; other businesses must divulge the

identity of their cash-paying clients in keeping with lawful revenue regulations

and law firms should not be an exception to this rule.  Ritchie, 15 F.3d

at 601.

      Some circuits have recognized exceptions to the general rule that client

identity and fee information are not privileged.  The three general exceptions

to this rule include the legal advice exception, the last link exception, and the

confidential communications exception.  Prosecutors should be aware that not all

circuits recognize these exceptions and that each circuit varies on what

circumstances justify a need for departure from the general rule.

      Several circuits have created an exception to the general rule that client

identity and fee information are not protected by the attorney-client privilege

where there is a strong possibility that disclosure would implicate the client

in the very criminal activity for which legal advice was sought.  The First

Circuit granted an exception where the defendant was charged in a narcotics case,

stating that there was a strong possibility that disclosure of a large

unexplained cash income could certainly be incriminating evidence in the pending

prosecution.  This court also noted that this exception is very narrow and

strongly fact driven.  Gertner, 873 F.Supp. at 735.  This exception was

also recognized in Sindel, 53 F.3d at 876; Baird v. Koerner, 279

F.2d 623 (9th Cir. 1960); In re Grand Jury Subpoenas (Anderson), 906 F.2d

at 1488.  This exception was specifically rejected in Lefcourt v. United

States, 125 F.3d 79, 87 (2d Cir. 1997).

      Several circuits have also recognized an exception where the disclosure of

the client's identity by his attorney would have supplied the last link in an

existing chain of incriminating evidence likely to lead to the client's

indictment.  This exception does not apply where the client who may be implicated

is not currently the subject of an ongoing investigation.  This exception has

been recognized in Gertner, 873 F.Supp. at 735 ; Sindel, 53 F.3d

at 876; Blackman, 72  F.3d at 1424; In re Grand Jury Subpoenas

(Anderson), 906 F.2d at 1488-1489; United States v. Leventhal, 961

F.2d at 40  (This exception extends the protection of the attorney-client

privilege to non-privileged information, thereby protecting other attorney-client

communications that are privileged, where the incriminating nature of the

privileged communications has created in the client a reasonable expectation that

the information would be kept confidential.).  The Sixth Circuit explicitly

rejected the last link exception in In re Grand Jury Investigation, 723

F.2d 447 (6th Cir. 1983).  

      The last exception the courts have recognized is an exception for

confidential communications.  This exception protects client identity and fee

information if, by revealing this information , the attorney would necessarily

disclose confidential communications.  This exception has been recognized in

Gertner, 873 F.Supp. at 735; Sindel, 53 F.3d at 876; Blackman,

72 F.3d at 1424.  Therefore, although generally speaking, a clients' identity

and source of payments for legal fees is not privileged, under certain

circumstances, where a disclosure of these facts would be tantamount to a

disclosure  of a confidential communication, this exception will apply.

    On the issue of penalties for non compliance, the Second Circuit

sanctioned a law firm that had refused to comply with a summons for Form 8300

information, based on its belief that the request violated the attorney-client

privilege.  The appellate court noted that client identity and fee information

are, absent special circumstances, not privileged, and that possible or even

likely client incrimination does not amount to a special circumstance.  The court

concluded that the failure to disclose was willful and an intentional disregard

of the law firm's obligation.  Accordingly, the court affirmed the district

court's refusal to order the refund of a $25,000 penalty assessed by the IRS

against the law firm for failing to disclose client identity on a Form 8300.

      An attorney in the Eighth Circuit argued that completion of Form 8300

constitutes 'compelled speech' which violates both his own and his clients' First

Amendment rights.  Sindel, 53 F.3d at 878.  The court stated that First

Amendment protection against compelled speech has been found only in the context

of governmental compulsion to disseminate a particular political or ideological

message.  The IRS summons requires the attorney only to provide the government

with information which his clients have given him voluntarily, not to disseminate

publicly a message with which he disagrees.  Therefore, the First Amendment

protection against compelled speech does not prevent enforcement of the summons.

      An attorney in the Second Circuit argued that the summons violated rights

provided by the Fourth Amendment.  This argument was rejected by the court in

United States v. Goldberger, 935 F.2d 501, 503 (2d Cir. 1991).

      Law firms have also made the argument that compelling an attorney to

provide evidence against his client violates the client's Fifth Amendment right

against self-incrimination.  This argument has also been rejected by many of the

circuits on the basis that the privilege against self-incrimination is a personal

privilege, and the client is not the one being compelled.  Couch v. United

States, 409 U.S. 322, 328 (1973);  Goldberger, 935 F.2d at 503; 

Ritchie, 15 F.3d at 602; Sindel, 53 F.3d at 877 (8th Cir. 1995);

Blackman, 72 F.3d at 1426.

      In Goldberger & Dubin, 935 F.2d at 505, the court also stated that,

even when the technical requirements of the attorney-client privilege have been

satisfied, it should still yield in the face of section 6050I, a federal statute,

which implicitly precludes application of the privilege.   

      Professional responsibility rules and bar association ethical opinions

which require that an attorney maintain client confidences or which purport to

compel an attorney to withhold information sought under section 6050I do not

override the clear mandate of a statute enacted by Congress.  In Caplin &

Drysdale, Chartered v. United States,  491 U.S. 617 (1989), the Court

stated that: "[t]he fact that a federal statutory scheme . . . is at odds with

model disciplinary rules or state disciplinary codes hardly renders the federal

statute invalid."  491 U.S. at 632, n.10.  And, most professional responsibility

codes allow or require an attorney to disclose client confidences when such

disclosure is required by law.  See, e.g., Model Code of

Professional Responsibility DR 4-101(C)(2), DR 7-102(A)(3) (1981).

      Several arguments have been made with respect to the Sixth Amendment.  The

first  is that "it interferes with the ability to citizens to retain counsel." 

This argument has been rejected by a number of circuits.  The Second Circuit has

noted that section 6050I does not preclude would-be clients from using their own

funds to hire whomever they choose.  To avoid  disclosure under section 6050I,

they need only pay counsel in some manner other than cash.  Goldberger,

935 F.2d at 504.  This argument was also rejected by Ritchie, 15 F.3d at

601; Sindel, 53 F.3d at 877 (A client is not prevented from communicating

with an attorney at will merely because the attorney must report large cash

transactions.).

      Another argument made is that the reporting requirement "discourages free

and open communication between client and attorney."  This argument has been

rejected in Ritchie, 15 F.3d at 601, and Sindel, 53 F.3d at 877. 

Law firms also argue that "it could destroy the attorney-client relationship

through disqualifications of counsel who is later called to testify as to the

form of payment."  Both Ritchie, 15 F.3d at 601, and Sindel, 53

F.3d at 877, also rejected this argument.  The Tenth Circuit has also held that

there is no right to counsel prior to indictment or after all appeals have been

exhausted and that a subpoena served on counsel during representation of a client

whose case is currently on appeal should be quashed only upon a showing that the

subpoena would create actual conflict between the attorney and client.  In re

Grand Jury Subpoenas (Anderson), 906 F.2d at 1488-1489.

      In addition, the strong governmental interest served by section 6050I in

permitting taxation of otherwise hidden income and in tracing funds related to

criminal activities may override any Sixth Amendment interest in keeping client

identity and fee information confidential.  Cf. Caplin & Drysdale,

Chartered, 491 U.S. at 631 (strong government interest in recovering

forgettable assets overrides defendant's Sixth Amendment interest in using the

assets to pay for his legal defense).

25.01[4]  Criminal Prosecution: Failing to File Correct Forms;

          Structuring to Evade Reporting

      Criminal charges with regard to section 6050I may be brought against

persons who willfully violate either the duty to file correct Forms 8300 or the

statute's prohibitions against structuring transactions to evade reporting

requirements.  However, a failure to furnish a correct statement to a payer named

in a Form 8300, as required by section 6050I(e), brings civil penalties only.

      As originally enacted, section 6050I did not contain any prohibition

against structuring.  Effective November 18, 1988, section 6050I(f), as enacted

in the Anti-Drug Abuse Act of 1988, expressly prohibits the structuring of

transactions for the purpose of evading the statute's reporting requirements. 

It also makes explicit prohibitions against causing or attempting to cause a

trade or business to fail to file a Form 8300, and against causing or attempting

to cause a trade or business to file an incorrect Form 8300.  Originally

captioned "Actions by Payers," the subsection was given its present caption

("Structuring Transactions to Evade Reporting Requirements Prohibited") on

November 5, 1990, to ensure that both payers and payees are subject to the

anti-structuring language. [FN2]

      25.01[4][a]  Duty To File Correct Forms 8300 -- WILLFULNESS

      Since Forms 8300 are required under the Internal Revenue Code, willful

failures to file and  willful filings of incorrect forms are criminal tax

offenses within Title 26.  Specifically, typical prosecutions will be for failure

to file Forms 8300 or for filing or aiding the filing of false Forms 8300,

punishable under 26 U.S.C. §§ 7203, 7206(1) and 7206(2), respectively. 

Similarly, prosecutions for structuring will also be brought pursuant to these

statutes as Section 6050I(f)(2) states that "[a] person violating this subsection

shall be subject to the same civil and criminal sanctions applicable to a person

which fails to file or completes a false or incorrect return under this section." 

[FN3] Prosecutions for violations of section 6050I will involve the same elements

as traditional tax violations using these statutes.  Therefore, reference should

be made to the appropriate discussions in Sections 10.00, 12.00, and 13.00 of

this Manual.

      A section 7201 tax evasion prosecution is not available for violations of

section 6050I, since there is no tax involved in Form 8300 reporting.  However,

the filing of a false Form 8300 or structuring activities either with respect to

nonfiling or false filing of Forms 8300 could constitute affirmative acts for

purposes of a traditional tax evasion prosecution involving, for the client,

individual income taxes on Form 1040.

      Successful prosecutions under sections 7203, 7206(1), or 7206(2) require

a showing of "willfulness."  Willfulness in the criminal tax statutes is defined

as "a voluntary, intentional violation of a known legal duty."  United States

v. Bishop, 412 U.S. 346, 360 (1973).  Willfulness is absent when the

violation occurs because of a good faith misunderstanding of the law or a good

faith belief that one is not violating the law, even if the belief or

misunderstanding is not objectively reasonable.  Cheek v. United States,

498 U.S. 192 (1991).

      Because violations of section 6050I are prosecuted under the criminal tax

statutes and because willfulness under those statutes requires a showing that the

defendant knew of the legal duty he is charged with violating, there has never

been much doubt that to establish a willful failure to file a Form 8300 or the

willful filing of a false Form 8300, the government was required to prove that

the defendant knew of the filing requirement.  Until recently, however, there has

been some doubt whether the government was required to show in a prosecution for

structuring to avoid the Form 8300 filing requirements (26 U.S.C.

§ 6050I(f)), that the defendant knew structuring was prohibited.  The

language of section 6050I(f) is virtually identical to the language of the

anti-structuring provision in Title 31 (31 U.S.C. § 5324) and a number of

courts had held that in a Title 31 structuring case the prosecution need only

prove that the defendant knew of the reporting requirements and acted to avoid

the requirements.  Knowledge that structuring was illegal was held to be

unnecessary.  United States v. Pinner, 979 F.2d 156 (9th Cir. 1992);

United States v. Beaumont, 972 F.2d 91 (5th Cir. 1992); United States

v. Gibbons, 968 F.2d 639 (8th Cir. 1992); United States v. Coming,

968 F.2d 232 (2d Cir.); United States v. Rogers, 962 F.2d 342 (4th Cir.

1992).  See also United States v. Holland, 914 F.2d 1125 (9th Cir.

1990).

      In Ratzlaf v. United States,  510 U.S. 135 (1994), however, the

Supreme Court rejected these cases and held that, to establish a willful

violation of the anti-structuring provision in Title 31, the government was

required to prove that the defendant acted with knowledge that his conduct was

unlawful.  In other words, the government must prove that the defendant knew that

structuring was illegal.

      Given the similarity in language between the two anti-structuring

provisions and the general requirement in tax cases that the government prove

that the defendant was aware of the legal duty he is charged with having

violated, it will be difficult to argue, following Ratzlaff, that the

government is not required to prove that a defendant charged with violating

section 6050I(f) knew that structuring was prohibited.  The sort of proof which

can be used to establish the element of knowledge is the same sort of proof which

has traditionally been used in tax cases.  Thus, knowledge may be shown by such

evidence as a prior history of filing Forms 8300, testimony of a cooperating

insider, admissions made to undercover operatives, or proof of affirmative

efforts to structure receipts around the filing requirement.

      25.01[5] Sentencing

      With respect to prosecutions under 26 U.S.C. § 7203 for willfully

failing to file Forms 8300, the maximum permissible prison term for such offenses

was changed from one year to five years by the Anti-Drug Abuse Act of 1988,

effective November 18 of that year.  A willful failure to file Form 8300 is a

felony offense, no longer a misdemeanor, pursuant to the Crime Control Act of

1990.

      Violations of 26 U.S.C. § 7206 involving Forms 8300 are unaffected by

the Anti-Drug Abuse Act and are still felonies punishable by up to three years'

imprisonment.  A conviction under 26 U.S.C. § 7206(1) or (2) for a filing

completed after November 1, 1987, but before November 1, 1993, is sentenced under

section 2T1.3 or section 2T1.4 of the Federal Sentencing Guidelines,

respectively.  A conviction under 26 U.S.C. § 7203 for failing to file a

Form 8300 after November 1, 1987, however, is not sentenced under Part T

("Offenses Involving Taxation").  Rather, section 2T1.2(c)(1) expressly provides

that the defendant is to be sentenced under section 2S1.3 ("Failure to Report

Monetary Transactions") of the guidelines. [FN4]

      For offenses committed after November 1, 1993,  amendments to the

Sentencing Guidelines provide that for violations based upon 26 U.S.C.

§ 6050I, prosecuted under either 26 U.S.C. §§ 7203 or 7206,

sentence is to be imposed pursuant to new section 2S1.3.  This section is

entitled "Structuring Transactions to Evade Reporting Requirements; Failure to

Report Cash or Monetary Transactions; Failure to File Currency and Monetary

Instruments Report; Knowingly Filing False Reports."

      Prosecutors should also be aware that both sections 7203 and 7206 provide

for mandatory costs of prosecution.

25.01[6]  Venue

      Appropriate venue considerations will depend upon the statute (section 7203

or section 7206) pursuant to which the prosecution is brought.  Reference should

be made to the discussion of venue in the sections of this manual (Sections

10.00, 12.00, and 13.00, supra) addressing the pertinent offenses.  Also,

see Section 6.00, supra, for a general discussion of venue.

25.01[7]  Statute of Limitations

      For prosecutions under 26 U.S.C. § 7203 for willful failure to file

a Form 8300, the statute of limitations is three years and begins to run