There have been plenty of stories on civil forfeiture recently. Two poker players had their cash seized in Iowa while driving home from a poker tournament in Illinois. They had their funds returned, but have now filed a lawsuit against the Iowa police. The IRS has also been using forfeiture. The New York Times today spotlighted the IRS using forfeiture–one example is, coincidentally, from Iowa.
For those not aware, civil forfeiture occurs when an individual’s funds are seized but the individual is not necessarily charged with a crime. The police agency involved alleges that there’s a pattern of behavior that shows that the individual’s funds are being used illegally. In the IRS’s case, this all involves Suspicious Activity Reports (SARs).
When you deposit $10,000 or more of cash, a Currency Transaction Report (CTR) is completed. A copy is sent to the Financial Crimes Enforcement Network (FINCEN). FINCEN gets so many CTRs that few are investigated.
But let’s say you want to avoid a CTR so you deposit less than $10,000. If you do that often enough, a SAR will be generated. You’re not informed when a SAR is generated. Like a CTR, a SAR is also sent to FINCEN. Most SARs are also sent to IRS Criminal Investigation. There are far fewer SARs than CTRs, and most are investigated.
The New York Times story notes the case of a restaurant owner in Iowa who had about $33,000 seized solely because she made regular cash deposits of less than $10,000. While SARs were not mentioned in the story, it’s clear that’s the cause of what happened. A SAR was generated, someone from IRS Criminal Investigation looked at the pattern and referred it to the Department of Justice; the DOJ then filed a suit to seize the money.
The only good news from the article is that the IRS is apparently going to limit the practice. In a statement made to the Times, Richard Weber, head of IRS Criminal Investigation, said the practice will be curtailed.
Unfortunately, the IRS has recently not always practiced what they preached. If you have to regularly deposit reasonable sums of cash–say, $6,000 regularly–you probably should every so often make sure one of your cash deposits is $10,000 or more so a CTR is filed. It’s better safe than sorry. And even if the IRS won’t institute civil forfeiture, there’s an alphabet soup of government agencies that still can.
One other comment I’ll make on this: Perhaps we can see some bipartisanship on an issue. I saw this issue highlighted by both the left and the right today. When Congress gets around to extenders, maybe they’ll throw something in to limit this practice.
