A financial institution may structure transactions between itself and other financial institutions to prevent the filing of BSA required reports or it may structure transactions between itself and its customers to circumvent the requirement to file BSA reports. The financial institution may:

Examine the institution’s BSA AML program and its implementation. All elements of an AML program, as mandated by 31 CFR Part 1020, Rules For Banks, 31 CFR Part 1021, Rules for Casinos and Card Clubs, 31 CFR Part 1022, Rules for Money Service Businesses, 31 CFR Part 1025, Rules for Insurance Companies, and 31 CFR Part 1027, Rules for Dealers in Precious Metals, Precious Stones, or Jewels, (PMSJ) must be examined. The details of such an examination are discussed in IRM 4.26.6, Bank Secrecy Act Examiner Responsibilities.

Determine if the financial institution has a monitoring system in place to identify any unusually complex transactions using multiple financial services.

Select a random sample of transactions and trace them through the records.

Review voided transactions to ensure the transactions were cancelled and not merely voided in the accounting records and a subsequent transaction conducted right below BSA recordkeeping or reporting requirements. This can be accomplished by tracing voids to any records prepared by third parties, such as issuers of money orders and travelers’ checks.

Analyze the pattern in which currency is deposited into all bank accounts. Does the financial institution consistently make deposits at $10,000 or below?

Eliminate legitimate reasons for the pattern in which deposits are made. For example, if the financial institution’s insurance policy limits the coverage on the amount of currency which may be retained at the store; multiple deposits may be made during one day to remain below this threshold.

Review daily cash reconciliations, if available. Compare the currency available to deposit from the report to the actual currency deposited. Is the fluctuation of currency on hand realistic for the pattern of business? Does currency fluctuate to keep the deposit at or below $10,000?

Scan transaction records for sales where the fees are waived. Is this legitimately part of a marketing plan by the institution? If not, why is it being done? Is there any pattern to the transactions?

Review prior examination file for issues related to potential structuring and documents which identify the financial institutions knowledge of the structuring law. This may help prove knowledge. Also compare the volume of services. Does the increase in volume correlate to know growth in the business? Is it consistent with other business in the area and with the known customer base?

To successfully structure a series of transactions, the customer may:

There is a balance 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 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 and the lack of a requirement to "know your customer" has made MSBs an attractive vehicle through which individuals structure funds.

Various examination methods can and should be employed to detect structuring by customers. All the methods described in the subsections below should be utilized, if possible. The examiner should always be prepared to adjust the examination plan to consider any method that would assist in revealing structured transactions.

One method is to analyze transactions at risk-based thresholds. These thresholds are determined by considering these factors:

Another method is to eliminate legitimate activities from the scope of records to be examined. Most 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. For example:

The safety of the employee conducting a structuring interview is a factor in considering the location of the interview. Interviews of customers should be held in an IRS office.

The examiner must consider the following:

To make a proper determination, certain information must be obtained from the interview; however, the initial interview questions need to focus on determining whether the financial institution, an employee, or a customer is responsible for the unusual or complex transaction which initially indicated structuring. Interview questions should address:

Examiners should try to put the person being interviewed at ease when discussing the general background of the transactions. Only after the examiner has an understanding of the reason the transactions occurred the way they did, the source of the funds, and the business purpose for the transactions, should the examiner ask about knowledge of the BSA. Asking about knowledge of the BSA initially may make the person defensive and less willing to provide a complete explanation of the activity.

When a financial institution's owners or officers are the subject of the structuring interview, knowledge of the BSA requirements should have been established in the initial interview. The examiner should have determined, through a series of open-ended questions, the extent of the subject’s knowledge of the law. While the subject may have shown knowledge during a prior visit(s), the examiner should be prepared to address the subject’s lack of recall of the BSA as a possible defense.

After the examiner has interviewed the owners/officers as to the specifics of the potentially structured transactions, the examiner may need to ask additional questions to clarify their knowledge of the BSA requirements, including tying down their knowledge of what structuring is.

If the subject of the interview is an employee, knowledge of the BSA requirements may be determined from reviewing training material and records under the financial institution’s AML program requirements. Additional interviewing may be required to determine the overall understanding of the BSA requirements and knowledge of the background of the transactions.

If the subject of the interview is a customer, the interview should be limited to determining whether the financial institution provided guidance on structuring transactions to circumvent the BSA requirements.

The 1994 Money Laundering Suppression Act (PL 103-325, tit. iv) established that the government needs only to 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 was enacted after the Supreme Court decision in Ratzlaff v. United States (510 U.S. 135 (1994)), which held that, under the law then in existence, the government had to show the transactor knew structuring was illegal.

The examiner should establish the subject’s knowledge of the BSA through a series of open-ended questions. The examiner should also establish that the subject had such knowledge at the time the transaction(s) occurred. Examples of open-ended questions are:

Examples of poor interview questions (because they are not open-ended) are:

The presence or indication of structuring that is undetected by the financial institution, despite the presence of an AML program with all the required elements, may indicate a weakness in the program.

A structuring violation on the financial institution should be pursued only if the results of the interview establish that all the following were true:

If you have established all of the elements as listed above, a referral for potential civil enforcement should be considered on Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, or a referral for possible criminal investigation should be made using Form 2797, Referral Report of Potential Criminal Fraud Cases, as appropriate. See IRM 4.26.8, Special Procedures.

Structuring violations on the financial institution are cited on the Letter 1112, Title 31 Violation Notification Letter. The Letter 1112 package includes standard paragraph language to be used on the Letter 1112.

Work papers relating to the structuring issue should be included in the open examination file.

If there are indications of structuring by an employee or customer and it is determined that the financial institution is not involved, the examiner must consider the following:

If the structuring interview is to determine whether the business was involved in structuring, the interview should be held at the place of business.

When the interview is with a customer, the safety of the Service employee will be the primary factor in selecting the site of the interview. The interview will normally be conducted in an IRS office.

The interview is like a BSA structuring interview. See IRM 4.26.13.3.4.2, BSA Structuring Interview. The primary difference is that the examiner must establish the subject’s knowledge of IRC 6050I.

The interview must ascertain the business’ knowledge of the actual transactions. Do they know the customer? Did the customer provide any information as to why he/she was conducting the transaction in this unusual way? You need to determine if there is a legitimate reason for the pattern in which the transactions occurred.

The interview will include questions to determine the subject’s knowledge of the BSA. In trying to structure a transaction to avoid the filing of a Form 8300 a violation of the BSA may have also occurred. Actions taken to avoid any BSA reporting or recordkeeping requirement will be developed, but only if such actions are part of a potential failure to file a Form 8300 or structuring under IRC 6050I(f).

The techniques for establishing the subject’s knowledge of the Form 8300 reporting requirements are the same as for a BSA structuring interview. See IRM 4.26.13.3.4.3, Establishing Knowledge of the BSA.

Consult a Fraud Technical Advisor for a possible criminal referral if the results of the interview establish:

Consider civil penalties if the results of the interview(s) establish:

Where more than one person participated in the structuring violation and sanctions are contemplated against each person:

Waiving penalties under the provisions of IRC 6724, Waiver; definitions and special rules, may not be appropriate in structuring cases.

See additional information in IRM 4.26.11.9.10, Lead Sheet #405, Fraud Awareness.

If the subject of the interview is the trade or business, then the work papers relating to the structuring issue should remain with the Form 8300 examination.

If the subject of the structuring interview is an employee or customer and it is determined that the trade or business is not involved, examiners should first consider whether a referral to IRS Criminal Investigation (CI) is warranted. If not, the relevant information concerning the customer or employee should be copied and a separate case file should be prepared. The separate case file should be completed following the guidance at IRM 4.26.11.10.3, Penalty Cases.

When the evidence found in a Form 8300 examination indicates that customers may have structured their transactions with the nonfinancial trade or business and their purpose for structuring was a potential violation of IRC 7201, Attempt to evade or defeat tax, or IRC 7206, Fraud and false statements, (to avoid tax or penalty), a Form 5346, Examination Information Report, must be prepared for each customer involved in the structuring. IRM 4.26.11.11.5, BSA Information Reports, has additional information.

If the Form 8300 examination is not closed and the related customers’ interview indicates the business participated in the structuring: