The “Restraining Excessive Seizure of Property through the Exploitation of Civil Asset Forfeiture Tools Act” (tortuously abbreviated as the RESPECT Act) (H.R. 5523) continues to make its way through Congress, with a markup session held on July 7, 2016. The bill follows an IRS change of policy in October 2014 to correct perceived abuses in the seizure of the proceeds of criminal structuring of currency transactions. It is a crime to structure currency transactions with the intention of preventing a financial institution from reporting the transaction to the Treasury. Since banks must file a Currency Transaction Report with Treasury’s FinCEN for currency transactions greater than $10,000, people sometimes conduct multiple sub-$10,000 transactions to evade this reporting. In such cases, in addition to criminal charges, the IRS often civilly seizes the structured funds with the intention of forfeiting them. Controversy arose over the fact that the IRS lawfully seized structured funds even when the funds were not the proceeds of some other crime. To be clear, structuring “clean” currency is no less illegal than structuring illegal-source currency. Still, many people thought that such seizures went too far.
To address this, the IRS announced in October 2014 that it “would no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring, unless there are exceptional circumstances justifying the seizure and forfeiture.” In June 2016, the IRS went further and “established a special procedure for people whose assets were involved in structuring to request a return of their forfeited property or funds.” Members of Congress apparently are uncomfortable with this being merely an internal IRS policy, and are seeking to give it the force of law.