Strucured Transactions and Crypto

[tcmay@netcom.com (Timothy C. May)]

Eric Hughes writes:

>    If A writes a check to 'cash', pays B with it, and B passes it on to
>    C, and so forth, are you saying that this is or will one day be illegal?
> 
> An individual note and its transfers are unlikely to be made illegal.
> But that's not the whole story.  A company engaged in the business of
> issuing such notes and not recording (perhaps, a fortiori, by not
> being able to record) the transactions among people for these
> instruments, however, could be ruled to be performing a separate
> activity which could then be made illegal.
> 
> Just because a single act is legal doesn't mean that a bunch of the
> same acts are.  For example, not reporting a $5000 cash transfer is
> legal, but not reporting half a dozen of them made to the same person
> in the same day almost certainly is.

The IRS/Treasury/etc. has the term "structuring" to refer to attempts
to circumvent the reporting laws by doing "individually legal"
transactions which are "collectively illegal." For example, getting
around the $10,000 limit (which may have been lowered, I hear) by
doing multiple $9,000 transactions. FinCEN (Financial Crimes
Enforcement Network) is a multi-agency body that looks for things like
this.

Consistent with earlier points about the government not wanting to
make it completely clear what's legal and what's illegal (regulatory
discretion), the laws about structuring are not clear. Suspicion of
structuring seems to be enough for a costly investigation and possible
prosecution.

It'll be interesting to see how crypto transactions are treated. The
possibilities for structuring are exciting to we Cypherpunks, which
means the Feds may act quickly to declare such transactions illegal.

(Connections to key escrow/GAK, illegality of digital cash, legal
hacking, and the huge new NRO complex near the credit card companies
is left as an exercise.)

--Tim May


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