What is structuring?

Structuring is an illegal act defined by the Internal Revenue Service (IRS) as “the practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by the Bank Secrecy Act (BSA) and/or IRC 6050I.”

As it relates to everyday banking and credit card gaming, the IRS could perceive certain customer strategies as structuring, even if the customer utilized the strategy merely as a convenience and/or to safeguard privacy. 

If a customer purchases $3,000 worth of money orders, the cashier must create a CTR, or Currency Transaction Report. This will require the customer to show the cashier their ID, and record the details of the ID and transaction in the CTR.

The customer may not want to provide their ID to the cashier for a number of valid reasons. One could argue that if an ID isn’t required for a $2,999.99 money order, they shouldn’t be forced to provide identification for a money order that’s $0.01 more. The customer may not want to provide ID because of privacy concerns. The customer may also want to avoid the extra time that it would take for the cashier to create the CTR. 

In either of these cases, the customer may choose to purchase a $2,999.99 money order to avoid the creation of the CTR. Even though the customer didn’t have nefarious reasons for wanting to avoid the Currency Transaction Report, the IRS considers this structuring and the cashier would be obligated to file a SAR (Suspicious Activity Report). 

Another common instance of structuring in the banking world occurs when a customer tries to avoid the Internal Revenue Service’s required reporting of deposits of $10,000 or more. As an example, a customer who has to deposit $10,000 in cash might deposit $9,999.99 to avoid the reporting. This transaction would be reported on a Suspicious Activity Report.

Currency Transaction Reports and Suspicious Activity Reports are just two tools used to help the government identify criminal activity. Money launderers and other criminal networks typically employ structuring or “smurfing” to avoid the scrutiny of reporting. Though you may not be a criminal whose intent is to conceal illegal activity, attempting to circumvent the submission of a Currency Transaction Report could still raise red flags and result in a Suspicious Activity Report being filed. This could ultimately lead to a criminal investigation.