Big Brother is Watching: When Taking Cash From Your Own Bank Account is a Federal Crime

Regulatory ComplianceWhite-Collar

I read, with interest, the indictment against the former Speaker of the House, Dennis Hastert. This prosecution serves as a warning to C-Suite executives who, from time to time, may need to withdraw cash from their personal bank accounts. Moreover, the Hastert prosecution is yet another example of the government overreaching by applying the federal criminal law to conduct never anticipated by Congress.

Decades ago, while Hastert was still a high school teacher, he allegedly engaged in a sexual relationship with a student. Years later, according to the indictment, the student and Hastert reached an agreement, whereby Hastert would pay the former student several million dollars in exchange for his continuing silence. Hastert decided to make these payments in cash, withdrawing funds from his personal bank account. There are no allegations that these funds were tainted by criminal activity, or that he used the money to further any crimes. Rather, it is uncontested that Hastert used the money to settle a strictly civil obligation.

The simple act of withdrawing funds sparked Hastert’s problems. He initially withdrew large amounts of cash in each transaction—amounts in excess of $50,000. When an individual withdraws money in excess of $10,000, a bank is required to file a currency transaction report with the Department of the Treasury. In Hastert’s case, his large withdrawals attracted the attention of the bank, which led to questions. In response, Hastert allegedly adjusted the amounts he withdrew in each transaction to increments of less than $10,000. This new method of withdrawing cash attracted the attention of FBI investigators, who questioned Hastert. Hastert supposedly told the FBI he was keeping the cash for himself. The indictment alleges Hastert lied to federal agents, a serious felony.

The government also charged Hastert with violating the Bank Secrecy Act, which prohibits the structuring of withdrawals to intentionally avoid the bank’s reporting requirements. This was originally intended to combat criminal money laundering, such as when an organized crime enterprise launders cash through bank accounts. The Act was never intended to criminalize ordinary citizens who withdraw cash from their personal accounts for entirely legitimate reasons. Nonetheless, Hastert now faces a long prison sentence, not for his alleged sexual misconduct, but for conducting his financial affairs in a way that avoided his bank’s reporting requirements.

It is not uncommon for C-Suite executives to withdraw cash from their personal accounts for any number of perfectly legitimate reasons. The Hastert case, however, alerts everyone to the power of the government to prosecute so-called structured transactions – the withdrawal of cash in increments of less than $10,000, accomplished with the intent to avoid a bank filing a currency transaction report.

It remains to be seen what will happen with Hastert’s case, but needless to say this indictment presents the risk of serious jail time. Once more, it demonstrates the unfettered power of federal prosecutors to pick from a vast array of statutes to criminalize otherwise legitimate activities. Everyone is in danger.

Remember, be careful out there.

 

 

 

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