Structuring

A customer asks a representative how large a currency deposit can be before the firm has to file a report. The representative tells him the figure and suggests he split his deposits accordingly. How is the representative's conduct assessed?

1. A.Acceptable; the reporting threshold is publicly available, and a representative may answer a factual question about it.Wrong. The wrong lies in the advice to split deposits, not in the existence of the figure in public sources.
2. B.Acceptable so long as the representative files a report on any deposits the customer subsequently makes.Wrong. Later reporting does not undo his participation in a scheme to evade reporting in the first place.
3. C.Problematic only if the customer's funds turn out to have come from criminal activity.Wrong. Evasion of the reporting requirement is the offence, independent of the origin of the money.
4. D.He assisted in structuring, which is itself an offence, and the question should instead have been escalated.Correct. Assisting is expressly covered, and the customer's question was itself reportable intelligence.

Why: Structuring is the act of breaking transactions into smaller pieces for the purpose of evading a reporting requirement, and it is a federal offence committed by anyone who structures, assists in structuring, or attempts to do either. Advising a customer on how to keep deposits below the threshold is assisting, and the representative's own knowledge of the customer's purpose makes his role deliberate rather than inadvertent. The correct response to the question was to escalate it, because a customer asking where the reporting line sits has told the firm something worth reporting. Nothing turns on whether the customer's underlying funds were in fact criminal; the evasion of the reporting requirement is itself the offence.

An investor earned well above the accredited investor income threshold last year after several modest years, and expects a similar figure this year. How does the income test treat him?

1. A.He qualifies, because the test looks to the most recent completed year and his income exceeded the threshold.Wrong. A single year is not the measure, and a one-year spike is exactly what the structure filters out.
2. B.He qualifies, because a reasonable expectation for the current year is sufficient on its own.Wrong. The expectation is one element added to two completed years rather than a substitute for them.
3. C.He does not qualify on income, since the test requires the threshold in each of the two most recent years plus an expectation for the current one.Correct. The three-part structure is designed to identify durable capacity rather than one exceptional year.
4. D.He does not qualify at all, since failing the income test forecloses accredited status by any route.Wrong. Net worth and professional certification are alternative routes the definition expressly provides.

Why: The income test is not a snapshot: it requires income exceeding the threshold in each of the two most recent years, together with a reasonable expectation of reaching the same level in the current year. Structuring it over three years filters out a person whose single good year came from a bonus, a severance payment, or a one-off sale, since the test is meant to identify durable financial capacity rather than a temporary balance. One qualifying year therefore does not satisfy it however large the figure. He may still qualify through the separate net worth test, or by holding one of the professional certifications the rules recognise, since the definition offers alternative routes rather than a single gate.

A customer purchases several money orders, each below the amount that would trigger currency reporting, structuring the purchases specifically to avoid that reporting threshold in the same way she might with cash. Does using cash equivalents like money orders instead of physical currency change the analysis?

1. A.Yes -- structuring rules apply exclusively to physical currency, so purchasing cash equivalents like money orders in this pattern raises no reporting or structuring concern at all.Wrong. Cash equivalents can be treated similarly to currency; the concern is not limited to physical currency.
2. B.Yes, but only because money orders are inherently untraceable instruments that fall entirely outside any anti-money laundering framework.Wrong. Money orders are not outside the anti-money laundering framework; they can be treated similarly to currency.
3. C.No -- cash equivalents such as money orders and cashier's checks can be treated similarly to currency for these purposes, so structuring a pattern of purchases using these instruments specifically to evade reporting raises the same kind of concern as doing so with physical currency.Correct. Cash equivalents can be treated similarly to currency, so the same structuring concern applies.
4. D.No, because money orders can never be purchased in an amount below the currency reporting threshold in the first place, making structuring with them impossible by design.Wrong. Money orders can be purchased in smaller amounts; that is exactly what enables this kind of structuring pattern.

Why: Cash equivalents such as money orders and cashier's checks function economically much like currency for the purposes anti-money laundering rules care about, and they can be treated similarly to actual currency in this context. Structuring a pattern of purchases using these instruments specifically to stay under a reporting threshold raises the same underlying concern as doing so with physical cash, since the substitution of instrument type does not change the deliberate evasion pattern itself.

A customer conducts several currency transactions, each individually below the amount that would trigger reporting, but structured in a deliberate pattern specifically intended to avoid that reporting threshold being reached in any single transaction. What is this conduct called, and is it itself a violation?

1. A.This is structuring, and it is itself a distinct violation -- deliberately breaking transactions into smaller amounts specifically to evade currency transaction reporting is prohibited in its own right, independent of whether any of the underlying funds are otherwise illegitimate.Correct. Structuring is a distinct violation, independent of the legitimacy of the underlying funds.
2. B.This is kiting, and it is only a violation if at least one of the individual transactions is later reversed or returned unpaid.Wrong. This pattern is structuring, not kiting, and it is a violation regardless of whether any transaction is later reversed.
3. C.This is free-riding, and it is only a violation if the funds are used to purchase securities before any of the transactions have settled.Wrong. This pattern is structuring, not free-riding, which is an unrelated cash-account securities purchase violation.
4. D.This is not itself a violation, since each individual transaction remains below the reporting threshold and therefore complies with the letter of the reporting requirement.Wrong. Structuring is itself a violation precisely because it deliberately evades reporting, regardless of each individual transaction staying under the threshold.

Why: Structuring is the deliberate practice of breaking what would otherwise be a single reportable currency transaction into smaller pieces specifically to keep each piece under the reporting threshold. It is a distinct violation in its own right, separate from whatever the underlying funds might otherwise be used for, precisely because it defeats the purpose of the reporting requirement by design, regardless of whether the funds themselves are illegitimate.