|
Structuring: Hear No Evil, Speak No Evil, See No Evil.
Rare coins are one of the few investments that are still private in the sense that a Social Security or tax identification number is not required in the transaction. There is, however, a major exception to this rule. In the event over $10,000 is received in cash in related transactions, a Form 8300 must be filed with the IRS, reporting the details of the transaction, including the taxpayer identification number (TIN) of the purchaser.
What if the client asks you if the reporting requirement can be avoided?
The answer to that is NO. Don't even think about helping avoid that process because it's called "structuring" and comes complete with severe criminal penalties including imprisonment, heavy fines and major problems with law enforcement agencies, including the NASD and the SEC.
What is structuring specifically? The IRS gave an example in their proposed regulation for comment in 1993. "Example 1. A person has a tacit agreement with a gold dealer to purchase $36,000 in gold bullion. The reporting requirement of this section cannot be avoided by recasting the single sales transaction into four separate $9,000 sales transactions."
Structuring is not only the actual transaction but is also the giving of advice of how to avoid reporting requirements. Simply, if a client asks how a transaction of $10,000 can be negotiated without reporting it to the IRS, any advice given to the client on how to accomplish this is also structuring. As a further example, if you advise a client that making several smaller purchases under $10,000 with several different dealers would eliminate the reporting requirement, that advice is structuring.
Financial planners dealing with multiple transactions of cash should be very aware of the fact that the IRS states that Form 8300 must be filed if the planner (as a recipient of the cash) knows, or has reason to know, that each transaction is one of a series of connected transactions that will total $10,000 or over within one year of the initial payment. Further, Form 8300 may be filed (voluntarily) for suspicious cash transactions even if the amount does not exceed $10,000.
The penalties for violation of the cash reporting requirements are severe as shown in this excerpt from Form 8300:
"Penalties - You may be subject to penalties if you fail to file a correct and complete Form 8300 on time (by the 15th day after the cash was received- Ed) and you cannot show that the failure was due to reasonable cause. You may also be subject to penalties if you fail to furnish a timely, correct and complete statement to each person named in a required report. A minimum penalty of $25,000 may be imposed if the failure is due to an intentional disregard of the cash reporting requirements.
Penalties may also be imposed for causing, or attempting to cause, a trade or business or fail to file a required report; for causing or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both."
In May of 1992, The Financial Crimes Enforcement Network ("FinCEN") was established by the Treasury Department. Its purpose: to provide an intelligence and analytical network in support of the detection, investigation and prosecution of domestic and international money laundering and other financial crimes. The users of this network are Federal, State, local and foreign law enforcement agencies.
Several "sting" operations have resulted in successful prosecutions of some coin dealers and financial advisors. The pleading of ignorance to these laws fall on deaf ears. Know the laws, comply with them. Violating this statute is not worth your career.
|
