Mr. SMITH. Many businesses thought that since they took the cash to the bank and the bank reported it, they were covered, which was erroneous. Mr. MCGRATH. Was their confusion as to whether or not cash was considered to be a money order or bank check? Mr. ARNOLD. Everybody knew they did not have to report cashier's checks or money orders. Mr. McGRATH. Was there any pattern that emerged across the transactions that you investigated? Mr. ARNOLD. Multiple cashier's checks. It was clear that multiple cashier's checks was the preferred technique to avoid reporting. I am not sure why they dealt with cash in the case of this Porsche, $30,000 of cash in one day, it must have been a bad day, didn't want to stop at five banks and buy the cashier's checks. We found a lot of multiple cashier's checks. Mr. McGRATH. There is a term in cash transactions reports from banks called smurfing. Mr. ARNOLD. Right. Mr. McGRATH. Did you see any examples of smurfing out there? Mr. ARNOLD. This is a form of smurfing, busting the transaction down into less than $10,000, but instead of putting the money in the bank, they are buying the cashier checks and taking them to the merchants. They would also break down the cash installments over a period of time, which is another form of smurfing. Mr. MCGRATH. Thank you. Chairman PICKLE. Mr. Shaw. Mr. SHAW. Thank you, Mr. Chairman. Mr. Chairman, in looking at the list of reported transactions, I see over the last 6 years in Florida there has only been a little over 12,000 transactions. Obviously, Florida has a large problem because of its geographic allocation as being a gateway center or it certainly has been over the last number of years for drug dealing, which would indicate that this is way, way off in comparing the transactions, I think it comes third in the country behind California and New York and that indicates it is probably more related to the population than to the transaction. The transactions would be far in excess of this. Correct, it is a felony not to make this report? Mr. ARNOLD. The criminal penalty on the books is that the crime is characterized as a misdemeanor but punishable by up to 5 years in prison, which is an anomaly. There is an amendment to a bill pending that would clarify classifying the crime as a felony. Mr. SHAW. Has anyone ever been prosecuted under this law? Mr. ARNOLD. I believe there has been one case filed, although the Department of Justice will be here later today and we have asked them to discuss that. Mr. SHAW. The law has been on the books since 1985? Mr. ARNOLD. Right. Mr. SHAW. I think that just bringing attention to this and having some people in some of the worst cases actually prosecuted and imprisoned for this is going to go a long way towards bringing about enforcement, but it would appear to me that perhaps maybe with sending out the IRS forms this year that the IRS should advise people that there is going to be some enforcement in this area and I feel that the work of this committee is going to solidify their efforts in that regard. Mr. ARNOLD. We would hope so. Mr. SHAW. What do you think about sending out some type of notification with tax forms Mr. SMITH. There is this poster that the IRS has put out notifying businesses of the requirement. However, at least in the Washington, D.C. area, of the businesses we went to, only one had any kind of notice posted in a viewable area and it wasn't this notice. [The poster referred to follows:] CASH PAYMENTS OVER $10.000 RECEIVED FOR GOODS AND SERVICES Did you know that currency payments over $10,000 for any goods, services, or other types of payments received in any trade or business must be reported to the Internal Revenue Service by the vendor within 15 days of the date the cash is received? Report these payments by completing a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, and Sending it to the Internal Revenue Service, Detroit Computing Center, P.O. Box 32621, Detroit, MI 48232 or by calling your local I.R.S. office. The law requires that owners or operators of any trade or business must file a Form 8300 on all cash payments over $10,000. Failure to do so could result in civil and criminal penalties including up to 5 years imprisonment. If you are suspicious of a large cash payment; have questions concerning the filing requirements; or are asked not to prepare a Form 8300, please call the I.R.S. Criminal Investigation Division at: Department of the Treasury Catalog Number 10404S Mr. SHAW. Thank you. Chairman PICKLE. Mr. Anthony. Mr. ANTHONY. I want to get into one area to make sure that I personally understand it. Mr. Arnold, in your statement on page 2, when you talk about the filing requirement that applies to all transactions involving the same person within a 24-hour period and related transactions over a period of time, at the end of that paragraph, you say "does not include transactions using a combination of cashier's checks or money orders." Mr. ARNOLD. Right. The statute defines cash as meaning coin or currency only, and not other forms of payment that we would consider to be similar to cash. That would be required-if you carried cashier's checks or any other form of monetary instrument across the border, you would have to file with the Customs Service, but in this case, it is defined as just currency. Mr. ANTHONY. Someone would offer to buy an item for $30,000 in cash Mr. ARNOLD. He would make it clear that he was referring to currency, greenbacks, bags of money, satchels of money, to make it clear that he meant currency, and not that you would just write a check or bring a cashier's check so that we would separate that possible misunderstanding or eliminate it. Mr. ANTHONY. Mr. Gomez and Ms. Jackson, in each of the instances, you clearly tried to do that so that your investigation would clearly show the intent was to transact business in cash and currency? Ms. JACKSON. Yes, I think we did. We let them know we are talking green dollars, not cashier's checks or any other type of note. Mr. ANTHONY. They would offer advice and suggestions on how to reduce the actual currency or cash to include a cashier's checkwould that be a violation of the law if, in fact they did a completed transaction in that way, you go in and say $20,000 cash and they say, "Give me $9,000 in cash and the rest in cashier's checks." You leave and get the cashier's check and give them less than $10,000 in cash, the rest in a cashier's check. Is that a violation? Mr. HECK. Mr. Anthony, section 60501 deals with individuals who cause or attempt to cause a trade or business to fail to file a form. I think there are provisions there which attempt to get at folks who cause a business to evade the reporting requirements. I am a little unclear as to the aspects of cashier's checks, but I think it is clear when somebody sits down with a businessman and tries to structure a deal to get around it, there is a clause in law saying that is a violation. That is something that may need to be clarified with legislation. Mr. ANTHONY. So the testimony that you gave earlier about one of the participants in your operation, when they said it is the letter of the law and not the spirit of the law, that person, as cynical as they may be, may be correct in this particular circumstance. They might have known that they were violating a clear spirit of the law, but maybe a sharp attorney could get them off on the technicality. Is that what Mr. Heck is saying? Mr. ARNOLD. Perhaps. In our opinion, that would fall into this area where the violation, if there were one, would be for structuring and that falls into the unclear area of whether the structuring applies to the business themselves and not just the customer. Mr. ANTHONY. If it is unclear, it falls upon the legislative body to conduct a hearing like this to establish a legislative history and then make recommendations. I assume you are recommending this matter be clarified. Has the committee received from the administration any recommendations for clarification in this area in the last few months? Mr. HECK. I can say that during our investigation and review of section 60501 we have been in contact with both Treasury and IRS to get ideas and recommendations on how the section can be improved to make it more enforceable. Mr. ANTHONY. Have they made recommendations to you? Mr. HECK. I think they will be prepared to give guidance today on what can be done. Mr. ANTHONY. Have they given your recommendations in the past, specific recommendations that everybody could understand? Mr. HECK. No. Mr. ANTHONY. They may be prepared to do so in their testimony today? Mr. HECK. Yes. Mr. ANTHONY. But there has been a failure until today, in an area that is potentially unclear they have not given guidance; is that correct? They can state their viewpoints on this, but I want to know how you feel about it in terms of whether you are getting any guidance. Mr. HECK. No. I think we are the ones that brought it to their attention. Mr. ANTHONY. In other words, our staff brought it to their attention? Mr. HECK. The issues discussed today, yes. I think they were aware of the fact that there are businesses not complying. I think this hearing today will spur them on. Mr. ANTHONY. I think it should spur them on. I liked what Mr. Shaw said-some of these requirements were put into the law in 1984. That is almost 6 full years, Mr. Chairman, for them to learn and understand the police community, that is, what their responsibility is. I think it is fairly clear from Mr. Gomez and Ms. Jackson's testimony and their report that there is a good understanding of the law and because of that fact it gives them a burden to go forward. Just to be crystal clear and to be abundantly fair, I think maybe we ought to try to devise some additional way to notify the business community at large of the responsibility, but I think that first we have got to inform them of how bad the problem is. I think if one transaction takes place, it would be easy for that one business person to say this one transaction isn't going to have that great an impact on money laundering. I think if they were aware of the magnitude of this problem, they would be shocked and maybe be willing to say no. It is a fear of loss of sales. If they knew their competitor was saying no and it was being enforced, at least they are walking into a better atmosphere. We are here to use this as an investigatory tool to stop the original criminal activity and it doesn't have to be drugs. |