Let's pick up the thread of our discussion of civil forfeiture from last month. In recent years, the IRS and other government agencies have often been quick to seize assets for suspected violations of the Bank Secrecy Act or other laws - even in cases where no criminal charges are ever filed. We discussed this problem in our May 8 post.
In this part of the post, let's look at what Congress and the IRS are doing to address the problem.
Many aggressive forfeiture actions have involved the so-called "structuring" of transactions. Structuring refers to using bank transactions of less than $10,000 to avoid having to report the transactions to government authorities. This reporting requirement is part of the Bank Secrecy Act and was intended to deter money laundering. But government agents have used the law in several egregious cases to target legitimate small businesses.
Last fall, the IRS announced that it would not pursue forfeiture or seizure of assets when the money involved had a legal source. The U.S. Department of Justice followed suit with a similar policy change in March of this year.
These are welcome changes. But government agents still need to follow the new policies and applicable federal laws. Unfortunately, that has not always been the case.
Under a law passed by Congress in 2000 called the Civil Asset Forfeiture Reform Act, government agencies such as the IRS that seize property are supposed to start the civil forfeiture process within 60 days. The IRS's own data shows, however, that in the period from 2005 to 2012, forfeiture cases involving structuring allegations took, on average, a full year to resolve.
Could more reform be in the offing? Senator Rand Paul of Kentucky and U.S. Representative Tim Walberg of Michigan have proposed a bill called the Fifth Amendment Integrity Restoration Act. The bill would make it more difficult for government agencies to use civil forfeiture.
No proposal is currently on the table, however, for amending the Bank Secrecy Act to make clear that seizure is not justified when the money involved in a structuring transaction has a legal source.