Opinion ID: 526736
Heading Depth: 1
Heading Rank: 5

Heading: reportability of the laganas transactions

Text: 80 Defendants next argue that ten of their convictions for failing to file CTRs (Counts 3, 5, 10, 13, 17, 19, 20, 22, 24, and 41) should be reversed because the transactions fell outside of the Act's reporting requirements. They assert that the transactions involving Paul Laganas did not constitute exchanges of currency in excess of $10,000 and, therefore, were not reportable. We examine these transactions in detail. 81 In nine of the these transactions, Laganas came to the credit union and presented a number (10-50) of third-party checks that were endorsed over to him. These checks, while individually well under $10,000, together exceeded that amount. At the end of each transaction, Laganas was given over $10,000 in cash. The defendants argue that since Laganas presented the teller with numerous checks, these transfers should be considered multiple transactions. They maintain that a bank has a duty to file CTRs on multiple transactions that exceed $10,000 only where it knows that the exchanges have been structured to avoid the CTR requirements. This argument is contrary to the law of this circuit. 82 Under our holding in Bank of New England, N.A., 821 F.2d 844 (1st Cir.), cert. denied, 484 U.S. 943, 108 S.Ct. 328, 98 L.Ed.2d 356 (1987), cashing a number of checks at one time, which together total more than $10,000 is a single transaction. There were, therefore, nine such transactions here. Because the factual scenario between the two cases is so close, we quote at length from Bank of New England. 83 In the instant case, McDonough's [Defendant's] practice was to visit the same branch of the same bank on only one occasion in a single day. He simultaneously would present a single bank teller two to four checks, all made payable to cash, for varying amounts under $10,000 which, when added together, equalled a sum greater than $10,000. In return, the same bank teller would transfer to him in a single motion a wad of cash totalling more than $10,000. 84 We have no trouble categorizing such conduct as a single physical transfer of currency in excess of $10,000 from the Bank to McDonough. We, therefore, conclude that the language of the regulations itself gave the Bank fair warning that McDonough's transactions were reportable. This case does not, as the Bank suggests, involve a bank customer engaging in multiple currency transactions. McDonough engaged in thirty-one separate transactions, each exceeding $10,000, which were effected by the use of multiple checks. The use of multiple checks during a single transfer of currency is not the same as multiple currency transactions. 85 Bank of New England, 821 F.2d at 849. 86 That the Laganas transactions may not have been deceptively structured to avoid the requirements of the Act does not warrant a different result. The holding in Bank of New England controls. We find that nine of the Laganas transactions were reportable. 87 The tenth Laganas transaction, Count three, is more troubling. Count three charged that the defendants violated the Act by failing to file a CTR for the Laganas transactions that occurred on September 23, 1983. On that date Laganas made four trips to the credit union, cashing checks at each visit. His September 23, 1983 transactions were as follows: 88 1. Time: 11:28 a.m. Teller: Coyne Checks: $97.00; 224.13; 153.80; 51.05; 111.16; 130.48; 148.01; 100.00; 126.00; 271.25; 125.30; 237.39; 161.00; 232.42; 152.58; 150.00; 103.95. Total: $2,575.52 2. Time: 2:01 p.m. Teller: Coyne Checks: $97.80 Total: $97.80 3. Time: 4:56 p.m. Teller: Maribito Checks: $118.00; 118.00; 42.40; 329.80; 356.00; 345.00; 164.46; 291.22; 361.97; 121.75; 975.45; 650.00; 132.00; 5,000.00 Total: $9,006.05 4. Time: 7:04 p.m. Teller: Maribito Checks: $85.84; 69.66; 3,000; 90.00 Total: $3,245.50 Overall Total for Day: $14,924.87 89 The government argues that these four multiple transactions should be aggregated and seen as a single transfer totalling $14,834.87. 4 The defendants maintain that neither the Act nor its implementing regulations can be read to require the aggregation of these multiple transactions into one reportable exchange. Such a reading, they contend, would violate the notice provisions of the fifth amendment. There is a rift in the circuits on this issue; we come down on the side of the defendants. 90 To guide our analysis, we begin by plotting this circuit's two fixed stars concerning the interpretation of the Currency Transactions Reporting Act. In United States v. Anzalone, 766 F.2d 676, the defendant engaged in a series of transactions with a bank conducted over a number of days. While separately each transaction was non-reportable, when aggregated, they exceeded $10,000. Anzalone was prosecuted for structuring his transactions so as to conceal their reportability from the bank and escape the Act's reporting requirements. Although the case involved an individual defendant, his liability turned, in part, on whether the financial institution had a duty to file CTRs for his exchanges. We held that the Act does not require a financial institution to file CTRs on multiple transactions that were carried out at the same bank but on different days, so long as the institution had no knowledge that the exchanges were spaced so as to circumvent the Act's reporting requirements. See Id. at 683. The court determined that the Act and its regulations only gave notice that single transfers in excess of $10,000 were reportable. Prosecutions for failing to file CTRs for multiple transactions, therefore, were violative of the notice requirements of the fifth amendment. See Id. at 681-82. A concurrence suggested that multiple transactions that totalled over $10,000, and were carried out on the same day at the same bank (or different branches of the same bank) might constitute a single, reportable transaction. See Id. at 684 (Aldrich, Senior Judge, concurring). That issue, however, was neither presented to nor decided by the Anzalone court. See Bank of New England, 821 F.2d at 851. 91 Our second bearing comes from Bank of New England. As discussed, supra, the defendants in that case argued that presenting multiple checks to a bank at the same time on the same day should be considered unreportable multiple transactions under the rationale of Anzalone. We distinguished between multiple transactions performed on different days and multiple check exchanges performed at one time on the same day. In the latter case, we held that such an exchange is not a multiple transaction but a single exchange subject to the Act's reporting requirements. See Bank of New England, 821 F.2d at 851. Although some circuits have cited Bank of New England for the proposition that banks are required to aggregate all transactions of an individual customer that are performed at the same bank, on the same day but at different times, see e.g. United States v. Gimbel, 830 F.2d 621, 625 (7th Cir.1987), that question was not decided by us. 92 Each of the parties in the instant action gleans different lessons from Anzalone and Bank of New England. The defendants contend that as in Anzalone, Laganas' four exchanges of currency, which were made at different times on September 23, 1983, should be considered multiple transactions. Since no individual exchange exceeded $10,000, there was no requirement to file a CTR for the transactions. The government, on the other hand, urges that we look behind these temporal differences and assess the economic reality of Laganas' transactions. The simple fact is that no matter what number of trips Laganas made to the credit union on September 23, 1983, he exchanged checks for a cash sum totalling over $10,000. Since the purpose of the Act is to deter money laundering and related uses of illegal gains, the government asserts that allowing defendants to escape the Act's reporting requirements simply by dividing transactions into smaller amounts would defeat the goals of the statute. Since neither Anzalone nor Bank of New England are dispositive of this issue, we look to our sister circuits. 93 Our research reveals that five other circuits have considered whether a financial institution is required to file a CTR for an individual's multiple transactions, which were carried out at the same bank, on the same day, but at different times. The Fifth and Eleventh Circuits have held that the Act's reporting requirements reach these types of transactions. The cases indicate that these circuits would look behind the form of the transaction and assess its economic reality. See e.g. United States v. Tobon-Builes, 706 F.2d 1092, 1098 (11th Cir.1983) (adopting substance-over-form approach). As the Seventh Circuit has recently noted, these circuits have read the regulations requiring financial institutions to report each 'physical transfer' of currency in excess of $10,000 to mean that a financial institution must aggregate all transactions by one customer on one day. Gimbel, 830 F.2d at 625; see Tobon-Builes, 706 F.2d at 1098-99 (multiple exchanges made at same branch on same day); United States v. Thompson, 603 F.2d 1200, 1202-03 (5th Cir.1979) (same); see also United States v. Heyman, 794 F.2d 788, 792 (2d Cir.) (suggesting same requirements), cert. denied, 479 U.S. 989, 107 S.Ct. 585, 93 L.Ed.2d 587 (1986). This reasoning has been extended to require aggregation of same day exchanges of both individuals and their associates that were made at different branches of the same bank. See United States v. Meros, 866 F.2d 1304, 1311 (11th Cir.1989); United States v. Lafaurie, 833 F.2d 1468, 1470-71 (11th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 2015, 100 L.Ed.2d 602 (1988); United States v. Cure, 804 F.2d 625, 629 (11th Cir.1986) (per curiam ); United States v. Giancola, 783 F.2d 1549, 1552-53 (11th Cir.), cert. denied, 479 U.S. 1018, 107 S.Ct. 669, 93 L.Ed.2d 721 (1986). Where the same day transactions are performed at different banks, however, there is no duty to file a report. See Meros, 866 F.2d at 1311; United States v. Denemark, 779 F.2d 1559, 1562-64 (11th Cir.1986); see also United States v. Torres Lebron, 704 F.Supp. 332, 335-36 (D.P.R.1989) (favorably citing the above cases). 94 While these interpretations of the Act and its regulations allow for the vigorous enforcement of the currency laws, we find the interpretations offered by the Seventh, Eighth and Ninth Circuits to be on firmer constitutional ground. They hold that a financial institution has no duty to aggregate into one reportable transaction separate physical transfers of currency made on the same day. See United States v. Risk, 843 F.2d 1059, 1061-62 (7th Cir.1988) (exchange made at same branch of one bank); United States v. Gimbel, 830 F.2d at 625-26 (7th Cir.1987) (same); United States v. Larson, 796 F.2d 244, 245-46 (8th Cir.1986) (both same and different branches of two banks on same day); United States v. Varbel, 780 F.2d 758, 762 (9th Cir.1986) (same day, different banks); United States v. Dela Espriella, 781 F.2d 1432, 1435 (9th Cir.1986) (associates made exchanges at different banks on same day); United States v. Reinis, 794 F.2d 506, 508 (9th Cir.1986) (different branches of same bank on same day); see also United States v. Mastronardo, 849 F.2d 799, 802-03 (3d Cir.1988) (stating the Act does not prohibit a customer from structuring his transactions to avoid reporting requirements). As the Seventh Circuit has recently noted: 95 [T]he Currency Transactions Reporting Act did not require the reporting of transactions in excess of $10,000. The Act did nothing more than authorize the Secretary of the Treasury to promulgate regulations governing disclosure. See United States v. Larson, 796 F.2d 244, 245 (8th Cir.1986). The regulations that the Secretary promulgated under this authority did not expressly require aggregation. Rather, they merely required financial institutions to report physical transfers of currency, 31 C.F.R. Sec. 103.11 (1986), in excess of $10,000. The essential characteristic of a structured transaction is that the customer effects several discrete physical transfer[s] of currency, id. The original regulations gave no hint that financial institutions were required to assess the economic reality behind these acts. 96 Gimbel, 830 F.2d at 625. 97 Since aggregation is not explicitly or implicitly required by either the statute or its implementing regulations, we find that imposing criminal liability for such conduct violates the notice provisions of the fifth amendment. See Anzalone, 766 F.2d at 680-82. Our decision is also influenced by the venerated tenet that penal statutes must be strictly construed. See McNally v. United States, 483 U.S. 350, 359-60, 107 S.Ct. 2875, 2881, 97 L.Ed.2d 292 (1987); Dowling v. United States, 473 U.S. 207 213-14, 105 S.Ct. 3127, 3131, 87 L.Ed.2d 152 (1985); Anzalone, 766 F.2d at 680-81 (collecting authorities). We understand that this holding leaves an interstice in the Act that is, no doubt, at odds with the congressional purpose of eradicating money laundering. We remain convinced, however, that 98 [a]lthough this court, like all other institutions of the United States, is supportive of the law enforcement goals of the government and society, we cannot engage in unprincipled interpretation of the law, lest we foment lawlessness instead of compliance. Kolender v. Lawson, 461 U.S. 352, 361, 103 S.Ct. 1855, 1860, 75 L.Ed.2d 903 (1983). This is particularly so when the confusion and uncertainty in this law has been caused by the government itself, and when the solution to that situation, namely eliminating any perceived loop holes, lies completely within the government's control. If the government wishes to impose a duty ... to report structured transactions, let it require so in plain language. It should not attempt to impose such a duty by implication, expecting that the courts will stretch statutory construction past the breaking point to accommodate the government's interpretation. 99 United States v. Anzalone, 766 F.2d at 682 (footnotes omitted). 5 Defendants' convictions under Count three are, therefore, reversed. 100 We pause to reaffirm the basis of our holding in Bank of New England. There, we upheld convictions stemming from multi-check exchanges totalling over $10,000 that were made at one bank in one day to a single customer during a single visit. Bank of New England, 821 F.2d at 850. We held that the regulations then in effect gave sufficient notice to the financial institutions that such exchanges were reportable, since they involved a single physical exchange of currency in excess of $10,000. See 31 C.F.R. Sec. 103.11. At the core of our decision was the holding that a multi-check exchange, made during a single visit, could not be considered multiple transactions. See Bank of New England, 821 F.2d at 848-50. Our holding today applies only where currency transactions are made at different times in a single day. Such transactions are multiple and cannot be aggregated to trigger the reporting requirements of the Act.