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We recently reported how the cops use civil forfeiture laws to steal for fun and profit. However, federal agencies, like the IRS, have been using the exact same laws to clear out innocent people’s bank accounts without even accusing them of a crime.

For the past 38 years, Carole Hinders has run Mrs. Lady’s Mexican Food, a cash-only restaurant in Arnold’s Park, Iowa. She would take the cash she earned at the restaurant, and deposit it into her bank nearby. However, all that changed on May 22, 2013, when the IRS, without warning, closed her account and confiscated all of her money:

I got a knock on the door and it was two IRS agents who informed me they had closed my business bank account and seized all my money, which was almost $33,000

Her crime? She had committed no crime. She was not even accused of a crime. However, because her deposits were consistently less than $10,000, the IRS suspected her of “structuring,” and on the basis of that suspicion alone, they took all of her cash.

Federal law requires that banks report any deposits over $10,000. However, to avoid triggering this reporting requirement, some criminal enterprises only deposit amounts that are less than 10k. This process is known as structuring.

To fight structuring:

The law grants the IRS ability to claim that when a person makes frequent small deposits into their own bank account that they are, with criminal intent, trying to avoid the federal requirement that forces banks to report cash transactions of $10,000 or more. This is a process the IRS calls structuring. Thus, the IRS is allowed to seize bank accounts of people accused of structuring without them being charged or convicted of any particular crime.

In practice, what ends up happening is that innocent people have their money stolen from them and either can’t afford to get it back or just give up trying. In an analysis of structuring cases, the Institute of Justice found that:

The IRS initiated 639 of these seizures in 2012, compared to 114 in 2005. One in five were actually prosecuted.

The low number of prosecutions hints at the fact that the IRS uses civil forfeiture not as a weapon against illegal activity, but as a plain sight money grab. Even more damning is the terminology they use to describe the practice. They explicitly divide structuring cases into two different categories – legal source and illegal source:

After a thorough review of [IRS] structuring cases over the last year … I.R.S.-C.I. will no longer pursue the seizure and forfeiture of funds associated solely with “legal source” structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture … The policy involving seizure and forfeiture in “illegal source” structuring cases will remain the same. (emphasis added)

You read that right. Legal source. Legal account. Legal deposit. But if the IRS doesn’t like it, they can take it. Except, now, they won’t. Maybe.

The IRS knows that it is stealing money from innocent people.

But why would the IRS steal your money? For one, because it’s what the organization was created to do. It literally exists to take your money. But more specifically, there is a huge financial incentive involved. Federal agencies get to keep large portions of the money they seize. And, as we have seen with police, the amount of money involved is significant – billions of dollars.

So what can people do to fight this?

Bitcoin comes to mind. One of the best features of the crypto-currency is that even if the government seizes your wallet, they can’t simply take your cash. Just look at what happened when the FBI seized the bitcoin wallet of the Dread Pirate Roberts:

While the FBI may have its hands on the founder of Silk Road’s bitcoin wallet, that doesn’t mean it has access to what’s inside. Ross Ulbricht, despite his own self-incriminations as the mastermind behind the online black marketplace, was able to do one thing right: secure his bitcoins.

A reported 600,000 BTC belonging to Ulbricht is in the FBI’s hands. But they can’t access the bitcoin wallet because it is encrypted.

That’s over $200 million in Bitcoins beyond the government’s reach.

Many people argue that crypto currencies help criminals avoid government control. But, when the government blatantly steals from its own people, the exact same technology that allows criminals to avoid government control becomes a tool allowing law abiding citizens to resist government tyranny.

PS. If you want to buy some Bitcoin, I hear the government sometimes sells them at a civil forfeiture auctions.

2 Responses

  1. Neil Caffery

    Just another example of why the name should be changed to the District of Corruption


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