It’s time to for Congress to reform or eliminate laws that make potential criminals out of law-abiding citizens engaging in routine banking transactions.
The Bank Secrecy Act requires financial institutions to report to the government deposits or withdrawals in excess of $10,000. But banks must also notify federal authorities if they believe customers are intentionally “structuring” their business to avoid the threshold.
Such “suspicious” activity can result in the IRS seizing accounts and subjected the assets to civil forfeiture, regardless of whether the account holder is ever convicted of a crime.
The law is intended to help law enforcement crack down on drug kingpins and other criminals. In fact, though, an April report from a Treasury Department inspector general finds quite the opposite. The results are stunning.
The audit identified 278 instances in which the IRS invoked structuring laws to seize cash and the source of the money was later identified. In 91 percent of those cases, the money had been obtained legally. In many instances, the IRS ignored reasonable explanations from property owners about their behavior.
The Institute for Justice has spent years documenting abuses under the Bank Secrecy Act, many involving small business owners who had their life savings confiscated simply because they regularly made deposits of just under $10,000. This is simply unacceptable in a free society.
The IRS has vowed to enact new policies intended to reflect the audit’s findings. Congress should consider that too little, too late and make it a priority to revisit the statutes that allow these injustices in the first place.