In 1970, Congress adopted a statute requiring financial institutions to report cash transactions over $10,000 to the government. Failure to report was a crime. In 1987, Congress made it a crime to structure financial transactions to evade this reporting law. Thus, for example, if Joe arranges his banking so the cash transactions are below $10,000 in order to avoid reporting, Joe commits a federal crime. What brought Congress to this point? Should we be alarmed at the extent of governmental intrusion into the arrangement of our financial affairs, or is the intrusion warranted? This article answers these questions and tells a good story as well.
The story begins with money laundering. Part II provides background on money laundering and describes the government's opening salvo against laundering, a statute requiring financial institutions to report cash transactions over $10,000 to the government. To skirt this law, launderers began to conduct multiple cash transactions just below the $10,000 reporting threshold. The army of persons who scurried from bank to bank to accomplish these transactions became known as "smurfs" because, like their little blue cartoon namesakes, they were pandemic. Smurfs thrived when the 1970 reporting law encountered trouble in the courts. The government's response to this new species was to adopt a new criminal provision, the 1987 anti-smurfing statute.
Congress adopted the anti-smurfing statute quickly and without careful analysis. The legislative history includes examples of problems with the reporting law and descriptions of cases the government lost.
Yet the history contains little analysis of the elements of this new crime, and no analysis of its basic theory, constitutionality, interaction with other reporting laws, or its relationship to federal criminal law as a whole. The lack of analysis results from several factors. Congress was in a hurry to plug the loopholes in the reporting statute to halt the drain of laundered money. Congress resented the insolence of money launderers, particularly the smurfs who flooded the banks with multiple transactions for $9900, thereby avoiding the reporting requirement. Finally, the anti-smurfing statute was upstaged, but not obviated, by legislation making money laundering per se a crime.
This article takes a thorough look at the anti-smurfing statute. Following this introduction, part II presents the setting that facilitated the emergence of smurfs. Part III examines the statute itself, including its basic theory, elements, constitutionality, unit of prosecution, and practical operation. Part IV examines how this new crime fits into federal criminal law as a whole. The article concludes that on balance, the reduction in privacy that the anti-smurfing statute effects is warranted by the harm money laundering and the drug trade cause.
Sarah N. Welling, Smurfs, Money Laundering and the Federal Criminal Law: The Crime of Structuring Transactions, 41 Fla. L. Rev. 287 (1989).