"Structuring" of Communications a Felony?

["Timothy C. May" <tcmay@got.net>]

At 10:57 PM -0800 12/28/96, Lucky Green wrote:

>IMHO, this closes the door on the foreign contracting loophole used by C2
>and others. It is now illegal for US persons to finance or contract out
>overseas crypto development, since doing so will obviously assist in
>proliferation. While not unexpected (I offered a bet on Cypherpunks that
>this would happen. Nobody took the bet.), this provision sets a dangerous
>precedence. The technical assistance prohibitions of the past have been
>transformed into general prohibitions against "financing, contracting,
>service, support, transportation, freight forwarding, or employment".
>
>Again, IANAL.

Nor am I, but I have a "prediction" to make in the spirit of Lucky's types
of predictions of doom.

I predict that we will see within two years a law making it illegal to
"structure communications" with the intent to avoid traceability,
accountability, etc.

This would be along the lines of the laws making it illegal to "structure"
financial transactions with the (apparent) intent to avoid or evade certain
laws about reporting of income, reporting of transactions, etc.

As I was wading through the 500 accumulated Cypherpunks messages upon my
return, and after I discarded hundreds of spam and loop messages, and all
of the Vulisgrams--and about 50 others my filter kicked into the trash--I
was struck by the discussion by our former Federal prosecutor, Brian Davis,
about a "structuring" case he personally handled--the gambling lawyer
("IANAL--not") who arranged to receive his winnings as three separate $9000
checks. He paid all of his taxes, perhaps because he was alerted to the
invwestigation, but he nevertheless paid them. And yet, as Brian notes, he
forfeited the $27,000 in income. (Brian has noted that the guy voluntarily
agreed to this outcome, to avoid a court battle. The effect is that he lost
his income for the crime of structuring transactions, not for evading
taxes.)

How long before the U.S. Code declares "attempting to obscure or hide the
origin of a communication" to be a felony? That would rule out orninary
mail without return adresses, but I think there are ample signs we're
already moving toward this situation (packages that could be bombs
putatively require ID, talk of the Postal Service handling the citizen-unit
authentication/signature system, etc.).

While this would not stop all uses of remailers, sendmail-type hacks a la
Port 25 obfuscation, and so on, it would give the Feds a powerful tool in
the suppression of remailer networks.

"The operator of Anonymizer.com failed to file adequate "Reports of
Suspicious Communications" with the Internet Regulatory Commission. He has
agreed to settle the case by forfeiting his machines, his office furniture,
and $225,000 in alleged profits from past uses of his remailer service."

The various lawyers on this list may point out flaws in my prediction.
Please do! And there are still workarounds to such laws. But I think the
use of such regulations to "get" those the government wants "got" is a
time-honored strategy in our modern state. As Whit Diffie notes, the War on
Drugs certainly did not stop drug use, but it most assuredly caused
_corporations_ to be pressed into service as de facto drug policy
enforcers. (How, you ask? The threat of forfeiture of corporation-owned
properties if drugs were ever found on them. And the loss of government
business if urine samples were not taken regularly. "Just say no" posters
up in the company cafeterias.)

Similar restrictions on cryptography--including the "suspicious
communications" reporting item discussed here--will have a similar effect:
casual or "underground"  users will of course not be directly affected, but
corporate or institutional users will find their institutions are actings
as the cops. The large corporations will dare not use "rogue" crypto, for
fear of being hit with tax evasion or SEC or FTC charges (think about
it--that undecodable communication using remailer networks could have been
about price-fixing, or collusion). And companies offering anonymizing
services, like the old business model of Community Connexion (C2), will
likely be hit with the "structuring" rules.

This will force strong, unescrowed crypto to the margins, to the
underground. Exactly the desired intent, of course.

You heard it here.

--Tim May




Just say "No" to "Big Brother Inside"
We got computers, we're tapping phone lines, I know that that ain't allowed.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Higher Power: 2^1398269     | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."