Nick Lotito & Seth Kirschenbaum

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How bank account activity could lead to a legal mess with the IRS

Did you know that if a business or an individual frequently deposits cash in amounts close to but below $10,000, a financial institution has the right to alert the IRS? If you didn't, you're not alone. Many people across the nation, including some here in Georgia, may not know that the Bank Secrecy Act gives financial institutions this power, nor do many realize that this report of cash flow could lead to criminal accusations from the federal government as well.

For those who don't know, the Bank Secrecy Act is designed to alert the federal government to potential illegal operations. If the IRS believes that the cash flow could be connected to illegal activity, civil asset forfeiture laws give the agency the right to seize assets in an account. But here is where things can get incredibly challenging for those suspected of committing a crime.

We all know that the presumption of the law is that an individual is innocent until proven guilty. Unfortunately, this isn't the case with civil asset forfeiture. Under this doctrine of the law, it is not an individual who is being charged with a crime, it's the property that has been seized which is, in essence, standing trial. Your property is guilty until proven innocent though, which can make it incredibly difficult to get back, even if you aren't even charged with, let alone convicted, of a crime.

This was the case for a Georgia business owner in 2013 who watched as the IRS seized $950,000 from his business' bank accounts even though he was never convicted of a crime. It wasn't until after a challenging and lengthy legal battle that the business owner was able to get a majority of his assets back but at a cost: the IRS still kept $50,000 and he had to pay out $100,000 in legal fees, making his legal victory bittersweet in the end.

Sadly, his story is not the only one, which has prompted some action from the federal government to reign in the use of forfeitures that might be considered the theft of innocent people's money. The question now is if the government's new standpoint on civil asset forfeiture will apply retroactively, helping past victim's recover the property that was wrongfully taken from them.

Source: Town Hall, "Congress Must Step Up and Reform Civil Asset Forfeiture Laws," Jason Pye, April 8, 2015

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Nick Lotito & Seth Kirschenbaum

Former Federal Prosecutors

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