This
section
addresses
the
issue
of
transactions
structured
to
avoid
certain
recordkeeping
and
reporting
requirements
of
the
Bank
Secrecy
Act
and/or
26
U.S.C.
6050I
(Form
8300).
This
section
will
address
the
following:
The
law
and
regulations
as
they
relate
to
structuring,
Identification
of
potentially
structured
transactions,
Development
of
a
structuring
violation
case,
and
Preparation
of
the
administrative
file.
Structured
transactions
may
be
discovered
in
the
course
of:
A
BSA
compliance
examination,
A
Section
6050I
compliance
review,
or
An
income
tax
examination.
Although
there
are
many
similarities
in
transactions
structured
to
avoid
the
BSA
and
Section
6050I,
there
are
sufficient
differences
that
these
will
be
addressed
separately.
The
examples
of
structuring
and
the
methods
to
identify
such
activity
presented
in
this
section
and
sections
9
and
12
are
not
all
inclusive.
The
examiner
should
constantly
be
alert
for
new
patterns.
4.26.13.2
(01-01-2003)
Structuring
Provisions
of
the
BSA
31
U.S.C.
5324
prohibits
certain
actions
by
any
person
who
acts
with
the
purpose
of
evading:
the
reporting
requirements
of
Section
5313
[Currency
Transaction
Reports]
or
the
reporting
requirements
of
Section
5325
[Special
Report
on
request
of
the
Secretary
respecting
information
required
to
be
recorded
upon
the
sale
of
certain
monetary
instruments]
or
the
reporting
requirements
of
Section
5316
[Report
on
Exporting
&
Importing
Currency
and
Monetary
Instruments]
the
reporting
or
recordkeeping
requirements
imposed
by
any
order
issued
under
section
5326
[Targeting
Orders]
or
the
recordkeeping
requirements
under
Sec.
21
of
the
Federal
Deposit
Insurance
Act
and
Section
123
of
Public
Law
91-508
relating
to
funds
transfers.
See
31
C.F.R.
103.33
The
actions
prohibited
by
31
U.S.C.
5324
include:
Structuring
or
assisting
in
structuring,
or
attempting
to
structure
or
assist
in
structuring,
any
transaction
with
one
or
more
domestic
financial
institutions
Causing
or
attempting
to
cause
a
domestic
financial
institution
to
fail
to
file
a
report
required
under
section
5313(a)
or
5325
or
any
regulation
prescribed
under
any
such
section
or
to
fail
to
file
a
report
or
to
maintain
a
record
required
under
section
5326
[targeting
order]
or
to
fail
to
maintain
a
record
required
pursuant
to
any
regulation
prescribed
under
section
21
of
the
Federal
Deposit
Insurance
Act
or
section
123
of
Public
Law
91-508
[the
funds
transfer
recordkeeping
regulations
found
at
31
C.F.R.
103.33]
Causing
or
attempting
to
cause
a
domestic
financial
institution
to
file
a
report
required
under
section
5313(a)
or
5325
or
any
regulation
prescribed
under
any
such
section
or
to
file
a
report
or
to
maintain
a
record
required
under
section
5326
[targeting
order]
or
to
maintain
a
record
required
pursuant
to
any
regulation
prescribed
under
section
21
of
the
Federal
Deposit
Insurance
Act
or
section
123
of
Public
Law
91-508
[the
funds
transfer
recordkeeping
regulations
found
at
31
C.F.R.
103.33]
that
contains
a
material
omission
or
misstatement
of
fact.
4.26.13.2.1
(01-01-2003)
Structuring
Defined
The
definition
of
structuring
for
purposes
of
currency
transaction
reporting
is
found
at
31
C.F.R.
103.11(gg).
The
elements
of
the
structuring
regulations
are:
A
person
acting
alone,
in
conjunction
with
others,
or
on
behalf
of
others,
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,
For
the
purpose
of
evading
the
reporting
requirements
of
31
C.F.R.
103.22
[requiring
Currency
Transaction
Reports].
The
definition
is
specifically
written
to
include
those
transactions
which
occur
beyond
a
single
business
day
and
transactions
which
are
conducted
through
more
than
one
financial
institution,
but
only
if
the
purpose
of
the
transaction(s)
is
to
evade
the
reporting
requirements.
It
is
not
the
intent
of
the
definition
to
expand
the
reporting
requirements
of
a
financial
institution.
The
definition
of
structuring
is
not
the
same
as,
and
is
separate
from,
any
requirement
to
report
suspicious
transactions.
4.26.13.2.2
(01-01-2003)
Identification
of
Potentially
Structured
Transactions
in
a
BSA
Compliance
Examination
Each
Bank
Secrecy
Act
(BSA)
compliance
examination
will
include
steps
to
identify
transactions
that
may
have
been
structured
to
avoid
the
reporting
requirements
as
listed
in
IRM
4.26.13.2.
Structured
transactions
may
involve
any
number
of
persons
and/or
the
financial
institution
being
examined.
The
compliance
examination
should
include
steps
to
identify
if
there
is
involvement
by:
The
financial
institution
acting
alone
for
its
own
reasons,
The
financial
institution
acting
in
concert
with
its
customers,
The
financial
institution
acting
in
concert
with
non-customers
(such
as
laundering
funds
for
other
unrelated
businesses),
Employees
of
the
financial
institution
acting
without
the
knowledge
of
the
institution
and
in
concert
with
customers,
Customers
acting
without
the
knowledge
of
the
financial
institution
or
its
employees.
How
transactions
may
be
structured
is
dependent
upon
the
specific
financial
services
being
offered.
In
IRM
4.26.9
financial
services
under
the
Internal
Revenue
Service
(Compliance)
jurisdiction
are
discussed.
Within
that
discussion
are
sections
describing
the
types
of
records,
which
should
be
maintained.
There
is
also
a
subsection
for
each
industry
entitled
Money
Laundering
Trends,
which
includes
examples
of
structured
transactions.
The
examiner
should
review
the
appropriate
subsections
of
IRM
4.26.9
as
part
of
the
preplanning
process.
An
effective
preplan
includes
a
working
knowledge
of
the
methods,
which
may
be
used
to
structure
transactions.
If
the
preplan
does
not
include
a
strategy
to
uncover
structuring,
such
transactions
may
be
missed.
If
structuring
is
recognized
at
the
end
of
the
compliance
examination,
the
evidence
may
be
incomplete.
4.26.13.2.2.1
(01-01-2003)
Structuring
by
the
Financial
Institution
IRM
4.26.1
describes
money
laundering
and
the
three
methods
used
to
"clean"
the
funds
and
return
them
into
the
legitimate
economy.
When
considering
whether
the
financial
institution
may
be
laundering
funds
for
its
own
benefit
or
for
the
benefit
of
noncustomers,
several
issues
should
be
addressed
in
the
examination:
Can
the
financial
institution
account
for
the
amounts
and
the
sources
of
the
funds
available
for
the
financial
services
being
offered?
This
can
normally
be
accomplished
by
a
cash
flow
analysis.
The
analysis
does
not
initially
need
to
include
the
entire
period
under
examination.
If
a
firm
is
actively
involved
in
laundering
funds
it
is
likely
that
the
amounts
will
be
material
and
that
it
will
occur
over
an
extended
period
of
time.
A
representative
selection
of
2
months
may
be
sufficient
to
uncover
such
activity.
It
is
important
that
the
analysis
not
only
account
for
the
amount
of
funds
available,
but
also
their
sources.
Are
the
financial
services
provided
strictly
for
the
benefit
of
the
customer?
It
needs
to
be
determined
whether
the
firm
is
using
the
"cover
"
of
providing
financial
services
for
layering,
placing,
or
integrating
funds
into
the
economy.
Various
examination
techniques
are
available:
Select
a
random
sample
of
transactions
and
trace
them
through
the
records.
Determine
whether
any
sales
are
being
regularly
made
to
owners
and/or
employees.
Scan
transaction
records
for
sales
where
the
fees
are
waived
and
determine
whether
this
is
part
of
a
marketing
plan
or
an
indication
of
self-dealing.
While
self-dealing
may
not
be
illegal,
for
example
it
might
be
indicative
of
an
attempt
by
a
Money
Services
Business
(MSB)
agent
to
evade
the
currency
or
Suspicious
Activity
Report
(SAR)
reporting
programs
of
the
agent's
principal
(e.g.
when
the
agent
of
a
money
transmitting
business
does
not
transfer
a
customer's
funds
through
the
principal's
proprietary
system).
Use
information
from
prior
administrative
file(s).
Have
there
been
any
unusual
increases
in
the
total
value
and/or
volume
of
all
services
offered
and/or
for
a
specific
service?
Can
the
increase
be
accounted
for
as
part
of
the
growth
of
the
business?
How
was
it
funded?
Use
the
available
information
from
administrative
file(s).
Is
the
total
value
and/or
volume
of
all
services
offered
consistent
with
other
businesses
in
the
area?
Is
it
consistent
with
the
customer
base?
Review
voided
transactions
to
ensure
that
the
transactions
were
cancelled
and
not
merely
voided
in
the
accounting
records.
This
can
be
accomplished
by
tracing
voids
to
any
records
prepared
by
third
parties,
such
as
issuers
of
money
orders
and
travelers
checks.
Structuring
by
a
casino
is
a
special
issue
as
the
movement
of
currency
into
and
out
of
a
casino
is
far
more
complex
than
other
financial
institutions
for
which
Compliance
has
jurisdiction.
See
IRM
4.26.9
and
the
student
text
for
the
Examining
Casinos
for
BSA
Compliance
(Course
3372).
A
compliance
examination
that
adequately
addresses
the
recordkeeping
requirements,
the
effectiveness
of
the
casino's
compliance
program
and
its
efforts
to
report
suspicious
transactions,
should
reveal
whether
the
casino
is
involved
in
structuring.
4.26.13.2.2.2
(01-01-2003)
Structuring
by
Customers
The
motivation
for
structuring
by
individuals
is
the
same
as
that
of
a
financial
institution.
The
primary
difference
is
that
the
customer
is
not
in
control
of
the
transaction.
In
order
to
successfully
structure
a
series
of
transactions
the
customer
may:
Obtain
the
cooperation
of
the
financial
institution
and
its
owners,
Obtain
the
cooperation
of
an
employee,
Lower
the
amount
of
the
transaction
to
avoid
any
identification
requirements,
Use
agents
to
complete
the
transactions,
Complete
the
transactions
at
a
number
of
different
financial
institutions,
or
Complete
numerous
small
transactions
over
a
number
of
days.
There
is
a
tension
between
the
need
to
disguise
the
transaction
and
the
need
to
move
large
sums
of
funds
inherent
in
any
structuring
enterprise.
Fees
that
are
charged
for
the
transaction,
the
time
involved
in
handling
small
transactions,
the
potential
need
to
involve
others,
and
the
need
to
place
the
transactions
with
more
than
one
financial
institution
in
order
to
remain
anonymous,
all
work
against
the
customer
seeking
to
structure
transactions.
However,
the
relative
lack
of
sophisticated
compliance
systems
compared
to
depository
financial
institutions
has
made
Money
Services
Businesses
(MSBs)
an
attractive
vehicle
through
which
to
structure
funds.
As
specific
industries
consolidate
the
economies
of
scale
make
the
use
of
sophisticated
detection
systems
possible.
Various
methods
can
be
employed
to
detect
structuring
by
customers.
The
examiner
should
always
be
prepared
to
adjust
the
audit
plan
to
consider
any
method
that
would
assist
in
revealing
structured
transactions.
One
method
is
to
establish
a
dollar
threshold.
The
threshold
is
determined
by
considering
two
factors:
What
is
the
largest
transaction
amount
that
can
be
conducted
without
requiring
identification
of
the
customer?
The
need
for
anonymity
will
cause
the
customer
to
consider
the
thresholds
that
trigger
a
recordkeeping
requirement
for
the
financial
institution.
The
financial
institution
itself
may
establish
thresholds.
The
major
money
transmitter
companies
require
identification
at
amounts
well
below
$3,000.
Check
cashers,
although
their
first
Bank
Secrecy
Act
(BSA)
threshold
is
over
$10,000,
will
often
establish
controls
well
below
that
as
part
of
their
internal
risk
management.
What
is
the
impact
of
the
maximum
face
value
of
a
single
transaction?
If
the
maximum
value
of
a
single
money
order
is
$500.00,
consider
how
many
can
be
purchased
at
one
time
but
remain
below
the
identification
requirement.
Some
financial
institutions
have
established
their
own
limits
on
transaction
amounts.
For
example,
a
money
transmitter
may
set
a
limit
of
$2,500,
wire
companies
may
establish
limits
for
non-traditional
transactions,
or
a
major
retailer
may
set
a
limit
for
the
purchase
of
money
orders
at
$2,999.00.
While
such
limits
appear
to
eliminate
reportable
transactions,
they
simply
require
the
customer
to
be
more
sophisticated
in
the
methods
employed
to
circumvent
these
limits.
The
examiner
should
be
especially
alert
to
the
potential
use
of
agents
or
nominees
in
these
situations.
Another
method
is
to
eliminate
legitimate
activities
from
the
scope
of
records
to
be
examined.
The
vast
majority
of
activity
through
a
financial
institution
is
legitimate.
During
the
initial
interview
the
examiner
should
determine
what
transactions
could
be
eliminated
from
the
scope
of
the
examination.
Consider
legitimate
transactions
either
by
amount
characteristics,
range
of
transaction
values,
and
the
frequency
of
customer
activity
within
a
day
as
well
as
over
time.
As
examples:
Who
is
the
primary
customer
of
a
check
casher?
If
the
primary
customers
are
presenting
payroll
checks,
then
it
should
be
possible
to
eliminate
checks
with
odd
dollar
amounts
(because
of
withholding)
and
of
a
certain
maximum
amount.
If
the
primary
customers
are
presenting
government
assistance
checks,
there
is
a
pattern
present
in
both
the
amounts
and
when
these
are
presented
that
should
make
it
possible
to
eliminate
them.
What
is
the
average
number
and
dollar
range
of
money
orders
purchased
by
customers
who
are
using
money
orders
as
replacements
for
checks?
What
is
an
average
value
range
of
wire
transmissions?
Is
it
possible
to
profile
legitimate
activity
and
exclude
it
from
the
examination?
What
is
the
average
amount
of
travelers
checks
sold
to
a
typical
customer?
Another
method
is
to
consider
the
impact
if
the
financial
institution
offers
more
than
one
type
of
financial
service.
For
example,
a
customer
may
seek
to
transport
funds
from
one
location
to
another
by
wiring
a
portion
and
purchasing
money
orders
or
travelers
checks
for
the
balance.
What
is
the
interrelationship,
if
any,
in
the
records
of
the
financial
institution
that
would
reveal
this?
Another
method
is
to
analyze
the
data
from
multiple
locations.
Customers
may
conduct
their
transactions
either
at
different
financial
institutions
within
a
given
area
or
through
branch
locations
of
the
same
financial
institution.
Consideration
should
be
given
to
periodically
merging
transactions
from
these
examinations.
By
sorting
the
merged
data
on
various
fields
it
may
reveal
a
pattern
of
structuring.
This
type
of
analysis
must
consider
the
issue
of
the
prohibition
against
maintaining
unauthorized
databases.
4.26.13.2.3
(01-01-2003)
Developing
a
BSA
Structuring
Case
In
the
course
of
an
examination,
the
examiner
may
encounter
transaction(s)
that
appear
to
be
structured.
However
accounting
entries
are
not
evidence
of
a
structuring
violation.
It
is
necessary
that
further
information
be
developed
before
a
determination
can
be
made
that
transactions
were
structured.
The
anti-money
laundering
statutes
are
interrelated.
The
various
statutes
under
Titles
12,
18,
and
31
are
meant
to
work
together
as
part
of
an
overall
effort
by
the
government
to
combat
money
laundering.
Therefore,
the
examiner
must
account
for
the
source
of
the
funds
and
address
any
possible
legitimate
reason
for
the
transaction.
These
are
civil
compliance
examinations.
The
examiner
is
not
to
conduct
a
criminal
investigation,
nor
conduct
the
examination
at
the
direction
of
Criminal
Investigation
(CI),
or
to
use
the
examination
simply
for
the
purpose
of
gathering
data
for
CI.
These
examinations
may
not
be
conducted
solely
for
the
purpose
of
gathering
information
for
use
in
any
tax
matter.
Once
the
Title
31
matter
has
been
resolved
the
examination
must
be
concluded.
Because
CI
and
Compliance
have
some
overlapping
responsibilities
under
the
Bank
Secrecy
Act
(BSA),
the
names
of
individuals
to
be
interviewed
should
be
forwarded
to
CI,
to
determine
whether
they
are
the
subjects
of
any
criminal
investigation
or
pose
a
flight
risk.
4.26.13.2.3.1
(01-01-2003)
Assignment
of
Structuring
Cases
Individuals
who
conduct
their
financial
transactions
with
currency
or
monetary
instruments
may
not
maintain
adequate
records
to
fully
account
for
all
transactions.
Therefore,
structuring
cases
must
be
assigned
to
examiners
who
are
conversant
with
the
interrelationship
of
the
money
laundering
statutes
and
can
conduct
an
examination
that
includes
the
use
of
an
indirect
method
to
complete
the
case.
4.26.13.2.3.2
(01-01-2003)
Site
of
Examination
The
safety
of
the
employee
conducting
a
structuring
examination
is
a
factor
in
considering
the
location
of
the
interview.
Because
a
determination
is
being
made
whether
the
customer
is
engaged
in
money
laundering,
most
interviews
should
be
held
in
an
IRS
office.
The
examiner
who
will
conduct
the
interview
should
consider
the
following:
What
are
the
potential
violation(s)?
What
are
the
elements
of
the
violation(s)
that
must
be
proved?
What
records
are
available
to
prove
the
violation(s)?
Who
is
in
possession
of
those
records?
How
will
those
records
be
obtained?
Who
must
be
interviewed
to
explain
those
records?
To
make
a
proper
determination
certain
information
must
be
obtained
from
the
interview:
What
is
the
person's
knowledge
of
the
Bank
Secrecy
Act
(BSA)?
Can
a
pattern
be
identified
in
the
transactions
to
support
a
determination
that
it
is
an
ongoing
activity?
Are
there
other
transactions
that
have
been
structured
and
have
not
been
identified?
What
is
the
total
value
of
all
structured
transactions?
If
the
transactions
are
structured,
for
what
purpose
were
they
structured?
Can
you
determine
the
source
or
likely
source
of
the
funds
used?
Are
they
from
a
legal
source?
In
some
instances,
(especially
if
funds
are
derived
from
a
criminal
source)
it
may
only
be
possible
to
eliminate
legitimate
sources
and
by
inference
conclude
that
the
remaining
sources
are
illegal.
Were
sufficient
funds
initially
available
to
conduct
a
series
of
transactions,
which
would
constitute
an
apparent
violation
(e.g.
above
the
$10,000
reporting
threshold
for
reporting)?
It
is
necessary
to
show
that
the
transaction
could
have
been
conducted
as
a
single
transaction
and
that
the
person
took
actions
to
break
it
up
to
avoid
a
currency
transaction
report.
To
what
extent
does
the
person
use
the
services
offered
by
depository
financial
institutions
(this
includes
checking
accounts
and
credit
cards)?
Does
it
appear
that
a
customer
has
access
to
banking
services
but
has
significant
activity
through
a
Money
Services
Business
(MSB)
to
hide
the
customer’s
identity?
4.26.13.2.3.4
(01-01-2003)
Establishing
Knowledge
of
the
BSA
If
the
subject
of
the
structuring
interview
is
a
financial
institution
(including
owners/officers),
knowledge
of
the
Bank
Secrecy
Act
(BSA)
may
be
established
from
prior
IRS
visits.
The
examiner
should,
through
a
series
of
open-ended
questions,
determine
the
extent
of
the
interviewee's
knowledge
of
the
law.
While
the
interviewee
may
have
shown
knowledge
during
a
prior
visit(s),
the
examiner
should
be
prepared
to
address
the
interviewee’s
lack
of
recall
of
the
BSA
as
a
possible
defense.
If
the
subject
of
the
interview
is
an
employee
and/or
a
customer,
the
most
difficult
portion
of
the
interview
is
to
establish
knowledge
of
the
BSA.
The
1994
Money
Laundering
Suppression
Act
(PL
103-325)
established
that
the
government
need
only
show
that
the
transactor
knew
that
there
was
a
BSA
reporting
requirement,
but
did
not
need
to
show
that
the
transactor
knew
that
structuring
was
illegal.
The
law
superseded
the
Supreme
Court
decision
in
Ratzlaff
v.
United
States
(114
S.
Ct.
655),
holding
that
the
government
must
show
the
transactor
knew
structuring
was
illegal.
The
examiner
should
establish
the
interviewee's
knowledge
of
the
BSA
through
a
series
of
open-ended
questions.
The
examiner
should
also
establish
the
interviewee
had
such
knowledge
at
the
time
the
transaction(s)
occurred.
Examples
of
open-ended
questions
are:
What
do
you
know
about
currency
transaction
reports?
When
did
you
acquire
this
knowledge?
Who
told
you
and
what
were
the
circumstances?
Is
there
anything
in
the
law
that
says
that
you
cannot
simply
break
a
transaction
into
smaller
amounts
and
avoid
the
currency
report?
Examples
of
inappropriate
questions
are:
Did
you
know
that
a
Currency
Transaction
Report
would
be
filed
if
you
cashed
a
check
for
over
$10,000?
Did
you
know
that
a
record
would
be
made
if
you
sent
a
wire
transfer
of
more
than
$3,000
with
currency?
Did
you
know
that
it
is
illegal
to
structure
a
transaction
to
avoid
the
Currency
Transaction
Report?
4.26.13.2.3.5
(01-01-2003)
Making
A
Determination
Civil
and/or
criminal
sanctions
should
be
pursued
only
if
the
results
of
the
interview
establish
that:
The
transactions
were
structured
to
avoid
a
currency
transaction
report;
The
person(s)
involved
had
knowledge
of
the
Bank
Secrecy
Act
(BSA);
No
legitimate
purpose
existed
for
structuring
the
transaction(s),
and
The
amounts
involved
are
material.
Use
of
the
Letter
1112
is
not
appropriate
in
structuring
cases.
If
you
have
established
all
of
the
elements
as
listed
above,
potential
civil
and/or
criminal
sanctions
should
be
recommended
(or
referred)
through
Form
5104.
See
IRM
4.26.8.
4.26.13.2.3.6
(01-01-2003)
Administrative
File
If
the
subject
of
the
structuring
interview
is
the
financial
institution
for
which
there
is
an
open
compliance
examination,
the
workpapers
relating
to
the
structuring
issue
should
be
included
in
the
open
compliance
examination
file.
If
the
subject
of
the
structuring
interview
is
an
employee
or
customer
and
it
is
determined
that
the
financial
institution
is
not
involved,
a
separate
administrative
file
should
be
prepared.
Upon
completion
of
the
issue,
the
file
