Congress enacted § 5324 of Title 31 on October 26, 1986, (but the law did not become effective until January 27, 1987), in response to the laundering of drug money through structured cash conversion schemes. In several appellate circuits, such structuring was not considered a crime, and such findings created problems for the prosecution of such money laundering schemes. As originally enacted § 5324 applied to any person who, for the purpose of evading the CTR reporting requirements, (1) causes or attempts to cause a financial institution to fail to file a CTR when required; (2) causes or attempts to cause a financial institution to file a required CTR containing a material misstatement or omission of fact; or (3) structures or assist in structuring, or attempts to structure or assist in structuring, any transaction with one or more domestic financial institutions.
After enactment of § 5324, some defendants who had engaged in structuring schemes began to argue (1) that they were entitled to "fair notice" that all forms of structuring had been made illegal by the enactment of § 5324 or (2) that to prove they acted "willfully," the government must establish that they knew that all forms of structuring had been made illegal. At first, these arguments were uniformly rejected. See, e.g., United States v. Nersesian, 824 F.2d 1294 (2d Cir. 1987); United States v. Hernando Ospina, 798 F.2d 1570 (11th Cir. 1986).
The first case to deviate from this uniform line of decisions was United States v. Aversa, 984 F.2d 493 (1st Cir. 1993) (en banc), cert. granted and vacated sub nom. Donovan v. United States, 114 S. Ct. 873 (1994) (mem.), which held that:
(1) a defendant acts "willfully" for purposes of § 5322 when he violates a known legal duty or acts in reckless disregard of that duty; and
(2) defendants were entitled to present evidence as to their ignorance that structuring to evade the CTR reporting requirement was illegal as part of their mistake-of-law defense.
- This created a split in the circuits regarding proof of knowledge that structuring was illegal as an element of willfulness and, in due course, the Supreme Court granted certiorari and decided Ratzlaf v. United States, 510 U.S. 135, 114 S. Ct. 655 (1994). The Court, in a sharply divided opinion, reversed the majority rule among the circuits and held that "to give effect to the statutory 'willfulness' specification [in 31 U.S.C. § 5322], the Government [must] prove [that the defendant] knew that the structuring he undertook was unlawful." 114 S. Ct. at 658. In other words, the government must prove, as an element of its structuring case, that the defendant knew "not only of the bank's duty to report cash transactions in excess of $10,000, but also of his duty not to avoid triggering such a report." Id. at 662 (emphasis added).
- Ratzlaf truly upset the government's criminal prosecutions for structuring currency transactions in order to avoid the CTR reporting requirement. In pending prosecutions involving closed investigations, the agents generally had not obtained evidence, if such evidence existed, that the defendant(s) knew that structuring transactions to avoid the filing of CTRs was illegal. Hence, many pending prosecutions had to be dismissed. Moreover, Ratzlaf very clearly applied to all cases not yet final for purposes of appeal (indeed, the Supreme Court vacated and remanded for further proceedings several CTR cases pending on petitions for certiorari at the time that Ratzlaf was decided). But to aggravate matters further, Ratzlaf was held to apply retroactively and convicted defendants began to flood the courts with habeas corpus and coram nobis petitions.
- The Department responded to Ratzlaf by formulating a proposed jury instruction for use in post-Ratzlaf structuring prosecutions, which can be found in the Criminal Resource Manual at 2034. See also United States v. Tipton, 56 F.3d 1009, 1011-13 (9th Cir. 1995) (affirming convictions obtained under § 5324 jury instruction.)
- In direct response to the Ratzlaf decision, Congress amended § 5324 effective September 23, 1994, by deleting the statutory "willfulness" requirement for all criminal prosecutions brought under 31 U.S.C. 5324. See Riegle Community Development and Regulatory Improvement Act of 1994, Pub. L. No. 103-325, Sec. 411, 108 Stat. 2160, 2253 (amending Section 5324 to include its own criminal penalty provision, now codified at 31 U.S.C. § 5324(c)).The effect of this legislative "fix" was to eliminate entirely the statutory willfulness requirement in all criminal prosecutions for violation of the "structuring" provisions of Section 5324(a)(3). Under the "Ratzlaf fix"-- applicable to offenses completed after the statute's effective date--it is only necessary to prove that criminal defendants prosecuted under 31 U.S.C. § 5324 acted for the purpose of evading the CTR reporting requirements. However, for structuring offenses completed between January 27, 1987 (the effective date of § 5324) and September 23, 1994 (the effective date of the "Ratzlaf fix" a willfulness instruction conforming to the Department's proposed Ratzlaf instruction or the instruction approved in Tipton, must be given.For both structuring and non-structuring offenses under § 5324 completed after September 23, 1994, it should only be necessary to prove that the defendant acted for the purpose of evading the reporting requirements. Non-5324 prosecutions (e.g., prosecutions of financial institutions or "individuals as financial institutions") should continue to be brought under 31 U.S.C. 5313 and 5322. However, "willfully" in this context arguably should mean no more than knowledge of the CTR reporting requirements.
[cited in USAM 9-79.200]