The Supreme Court's interpretation of the word "willful": ignorance of the law as an excuse to prosecutions of structuring currency transactions.

• Author: Simon, Lindsey H.
• Position: Supreme Court Review - Case Note

1. INTRODUCTION

   In Ratzlaf v. United States,(1) the United States Supreme Court held that to establish a "willful" violation of the federal statutes that prohibit the structuring of currency transactions, the government must prove that the defendant had knowledge that his conduct was illegal.(2) Structuring occurs when an individual breaks up a sum greater than $10,000 into more than one transaction of smaller amounts for the purpose of evading the federal reporting requirements.(3) These reporting requirements mandate financial institutions to file a Currency Transaction Report with the Secretary of the Treasury for all cash transactions exceeding $10,000.(4) The dissent disagreed with the majority's interpretation of the term "willful," concluding that the federal structuring statutes require the defendant to have knowledge of the reporting requirement and an intent to evade the filing of a report.(5) Contrary to the majority, the dissent did not interpret "willful" to require knowledge on the part of the defendant of the illegality of his conduct.(6)

   The defendant in Ratzlaf was charged with breaking up a $160,000 cash transaction into several smaller transactions of under $10,000 in violation of 31 U.S.C. [sections][sections] 5313, 5322, and 5324.(7) The United States Supreme Court reversed the ruling of the Ninth Circuit Court of Appeals, finding that defendants are guilty of violating the federal anti-structuring provisions only if they act with knowledge that structuring is prohibited by law.(8)

   This Note argues that the majority chose the wrong definition of the term "willful" and that the dissent's interpretation of the mental state necessary for a "willful" violation of the anti-structuring statute is correct. The dissent's interpretation is preferable because it is consistent with lower court holdings and with legislative history, and precludes the use of an ignorance of law defense. In addition, the dissent correctly concluded that structuring is not an innocent activity; it implies that the defendant knew of the reporting requirement and intended to evade it.

   Finally, the dissent's interpretation of the anti-structuring statute is preferable because the majority's interpretation renders prosecutorial victories impossible. Thus, to put any bite back into the law prohibiting the structuring of currency transactions, Congress would have to amend the statutes once again--which it has recently done. In the fall of 1994, Congress passed legislation which changed the mens rea necessary for a violation of currency structuring from "willful" to "knowingly," thereby effectively nullifying the Supreme Court's holding in Ratzlaf.

2. BACKGROUND

   1. THE HISTORY OF THE 1970 ANTI-STRUCTURING STATUTE AND THE COURT'S

      INTERPRETATION

      In 1970, concerned with the increased use of cash in criminal activities,(9) Congress passed the Currency and Foreign Transactions Reporting Act (Act).(10) Part of the Bank Secrecy Act, the Act provided that a domestic financial institution(11) must file a currency transaction report (CTR) with the Secretary of the Treasury whenever it is involved in a cash transaction of more than $10,000.(12) Any institution that "willfully" violates the Act's reporting requirements, as set forth in 31 U.S.C. [sections] 5313(a), was subject to criminal penalities under 31 U.S.C. [sections] 5322(a).(13) Structuring occurs when an individual breaks up a sum larger than $10,000 into more than one transaction of smaller amounts for the purpose of evading the federally mandated reporting requirements.(14)

      Problems in prosecutions arose under the 1970 Act, because the Act required banks and not individuals to file reports for currency transactions exceeding $10,000.(15) Thus, an individual who structured a currency transaction was not liable under the specific provision of 31 U.S.C. [sections] 5322. Appellate courts split as to whether courts could hold an individual responsible under any federal provision for causing a bank to fail to file a CTR.(16) The split among circuits is exemplified by cases from the Eleventh and First Circuits. In United States v. Tobon-Builes,(17) the Eleventh Circuit held that an individual who "willfully" structures currency transactions to be under $10,000 so that a bank fails to file a CTR is guilty of false representation and concealment of fact to the federal government under 18 U.S.C. [sections] 1001.(18) The defendant in Tobon-Builes used various false names and converted $185,200 into twenty-one separate cashier's checks, each in amounts less than $10,000, at eleven different banks.(19) The court concluded that the defendant's conduct was "willful" and therefore culpable, because the evidence "clearly established" both his knowledge of the reporting requirement and his intent to cause a financial institution to fail to file a report.(20)

      In contrast, in United States v. Anzalone,(21) the First Circuit held that a defendant who purchased three checks, each under $10,000, from a bank on one occasion and later purchased $75,000 worth of checks, again in amounts under $10,000, over a three week period, was not guilty of structuring currency transactions.(22) All of the defendant's checks went to a stock brokerage firm to pay for bonds purchased for the wife and mother of a public official.(23) Because the defendant was under no duty to report his transactions, the court concluded that he could not be guilty under 18 U.S.C. [sections] 1001 for false representation of a material fact to the federal government.(24)

   2. THE HISTORY OF THE 1986 ANTI-STRUCTURING STATUTE AND THE COURT'S

      INTERPRETATION

      Recognizing the split among the circuits and the difficulty in prosecuting violators of the 1970 Act, Congress once again confronted the problem of money laundering in 1986.(25) Section 5313(a)'s requirement that an institution file a CTR for a currency transaction greater than $10,000 and [sections] 5322(a)'s imposition of criminal penalties for a "willful" violation of [sections] 5313 were not enough on their own to sustain a conviction against individuals who structured currency transactions to avoid the federal reporting requirements.(26) Thus, to increase compliance with the reporting requirements, Congress passed a new criminal anti-structuring statute, 31 U.S.C. [sections] 5324, as part of the Money Laundering Act of 1986.(27) This new anti-structuring statute explicitly prohibits an individual from structuring a financial transaction to evade the 31 U.S.C. [sections] 5313(a) reporting requirement and imposes criminal penalties on individuals who "willfully" violate this prohibition.(28)

      Thus, [sections] 5313 prohibits structuring currency transactions in under $10,000 amounts to avoid the federal reporting requirement; [sections] 5322 imposes criminal penalities on anyone "willfully" failing to file such a report; and [sections] 5324 explicitly prohibits an individual from causing a financial institution to fail to file a report.

      In debating the new amendment to the Act, both the House and the Senate explicitly indicated that by creating [sections] 5324 they intended to hold individuals liable for causing a financial institution to fail to file a CTR.(29) Specifically, Congress intended the enactment of [sections] 5324 to resolve the jurisdictional split by codifying the decision in Tobon-Builes, which imposed criminal liability on individuals who "willfully" structure currency transactions to evade the federal reporting requirement.(30)

      The Senate attempted to clarify the type of activity that warrants a conviction under the anti-structuring statute by offering an example of conduct which satisfies the "willful" requirement.(31) According to the Senate Committee on the Judiciary Report:

      a person who converts $18,000 in currency to cashier's checks by purchasing two $9,000 cashier's checks at two different banks or on two different days with the specific intent that the participating bank or banks not be required to file Currency Transaction Reports for those transactions, would be subject to potential civil and criminal liability.(32)

   3. PROBLEMS IN INTERPRETING THE 1986 ANTI-STRUCTURING AMENDMENTS

      Despite Congress' efforts to reduce confusion and to increase the number of prosecutions of structured currency transactions, not all courts agreed with the Eleventh Circuit's conclusion in Tobon-Builes that defendants can be convicted under [sections] 5322 for "willfully" structuring currency transactions without specific knowledge that they are violating the law.(33) In United States v. Aversa,(34) the First Circuit considered the state of mind required for a "willful" violation under [sections] 5322.(35) Defendants Aversa and Mento structured a series of deposits in increments under $10,000, so one of their wives would not discover the transactions during divorce proceedings.(36) The court held that in the context of the anti-structuring statute, a "willful action is one committed in violation of a known legal duty or in consequence of a defendant's reckless disregard of such a duty."(37) Furthermore, the First Circuit stated that "an unintentional, nonreckless mistake of law is a complete defense to a structuring charge."(38) Because neither of the defendants was able to offer a defense showing that he had no knowledge that structuring was illegal, the Court of Appeals had no way of determining whether the defendants met the "willfulness" requirement. Based on this interpretation, the court determined that the defendants were entitled to a rehearing to decide whether they had knowledge of the reporting requirements or recklessly disregarded those requirements.(39)

      Contrary to the First Circuit's line of reasoning, the Second Circuit held in United States v. Scanio(40) that the government need not prove that the defendant had knowledge of the reporting requirement law to satisfy the "willfulness" requirement of 31 U.S.C. [sections] 5322.(41) Rather, to convict a...