In May 2017, Senators Charles Grassley, Dianne Feinstein, and Sheldon Whitehouse introduced the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017 (Senate Bill 1241). This bill, which is currently being reviewed by a Senate committee, could have serious implications for financial privacy if it becomes law.
The proposed legislation would give authorities the power to seize almost all of someone’s assets if they fail to fill out a specific form when crossing US borders. Those found guilty could face up to 10 years in prison.
Current Reporting Requirements
Under current law, if you carry more than $10,000 in cash or certain monetary items across the US border, you have to fill out a reporting form, Form 105. This form goes to a government agency called the Financial Crimes Enforcement Network (FinCEN).
Yet a bank transfer does not need to be reported; only physically carrying cash or certain items.
Senate Bill 1241: Proposed Expansion of Reporting Requirements
The new bill would make the rules much stricter.
Senate Bill 1241 expands the definition of monetary instruments to include any prepaid access device:
“…[A]n electronic device or vehicle, such as a card, plate, code, number, electronic serial number, mobile identification number, personal identification number, or other instrument, that provides a portal to funds or the value of funds that have been paid in advance and can be retrievable and transferable at some point in the future.”
This means you will need to add up the value of prepaid debit cards, gift cards, prepaid phones, and prepaid coupons before you cross the border. Not to mention accounts in any cryptocurrency. If the total value exceeds $10,000, you will need to report your holdings.
If you’re arrested for failing to comply with the new rules, the proposal would allow the government to file a secret motion with a federal judge for a restraining order that would freeze any account you own. Even your safe deposit box could be cleaned out. The restraining order could be extended indefinitely.
The intent of this procedure is to:
“…prevent the removal of the funds in the account by the person arrested or charged, or by other persons associated with that person, during the time needed by the Government to conduct such investigation as may be necessary to establish whether there is probable cause to believe that the funds in the accounts are subject to forfeiture in connection with the commission of any criminal offense.”
And while the restraining order is in effect, the government could wiretap your phone and monitor your email and record your web browsing history.
Civil Forfeiture and Asset Seizure
Under the loose rules that govern current federal civil forfeiture laws, investigators need only probable cause that you have violated a state or federal law to freeze your assets.
A judge may consider hearsay evidence. This is otherwise inadmissible in court when deciding whether probable cause exists. Federal agents or local police can seize your property on the spot. If the police want to seize the cash you’re carrying, you can do nothing to stop them. [You can find more information here: civil forfeiture cash.]
In other words, you can lose your property without being tried, convicted, or even arrested for a crime. Even if you’re ultimately found innocent, there’s no assurance of recovering your belongings.
In most cases, reclaiming seized property involves initiating a legal battle, often at considerable expense, against the seizing authority. That’s why the vast majority of civil forfeiture victims never get their property back.
The proposed measure represents an extreme form of civil forfeiture. Federal authorities could freeze your assets without needing even probable cause. Your accounts would remain frozen while investigators sift through your financial records in search of evidence against you.
If this bill passes, prosecutors will be able to make deals with defendants who want their frozen assets returned to them.
Senate Bill 1241: Proposed Expansion of Financial Reporting Requirements
Federal law already requires businesses classified as financial institutions to notify FinCEN of suspicious transactions made by their customers. You have no right to sue any business that files a Suspicious Activities Report (SAR) about you, even if the suspicions are false, fabricated, or made in bad faith.
SAR requirements were once restricted to banks and credit unions but have now been extended to many other businesses. Broker-dealers, casinos, and money services businesses, including the US Postal Service, must also file them.
Banks and other businesses subject to SAR requirements must watch for dozens of behavioral patterns by their customers. These patterns involve legal transactions but may indicate criminal activity. Since businesses don’t know which customers, if any, are engaged in illegal activity, all customers are subjected to pervasive, systematic, and continuous surveillance.
The proposed bill would expand these requirements by forcing any business that issues or redeems any type of prepaid product to file SARs. For instance, Walmart, which sells pre-paid gift cards, debit cards, and so on, would need to file them. Any company offering cryptocurrency accounts would need to register as a money services business and would be subject to these rules as well.
Senate Bill 1241 has bipartisan support. And there’s a decent chance it will eventually become law. If it does, it will change the legal landscape for anyone holding cryptocurrencies. And it will curtail research and development of the revolutionary blockchain technology that underpins cryptocurrencies.
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