The U.S. Treasury through its Financial Crimes Enforcement Network (FinCen) warned about 2,000 businesses located in the downtown Los Angeles Fashion District that they must follow stricter reporting rules for cash transactions.
A geographic targeting order will require businesses in the district to report the receipt of $3,000 or more in cash. This is a substantive change from the general reporting requirement for cash transactions over $10,000. The requirement goes into effect on October 9, 2014 and will last for 180 days (about six months). Failing to report these transactions could lead to criminal indictment.
This move is one of the largest uses of such an order by the U.S. government.
The enforcement action is an effort to crack down on money laundering and Bank Secrecy Act violations apparently rife through the Fashion District. One type of scheme uses drug money to purchase goods in the U.S. Then the clothing or high-end shoes are shipped abroad, often to Mexico. After the sale of the goods, the proceeds go to the drug trafficking organizations.
Law enforcement agents recently seized more than $90 million in a trade-based money laundering investigation dubbed “Operation Fashion Police." Money was found in shoe boxes, duffel bags, banker’s boxes and the trunk of a Bentley. The volume of wholesale trade with Mexico going through the fashion district has made it a hub for sending drug proceeds south.
Businesses affected by the reporting change include stores selling garments and textiles, transportation companies, travel agencies, perfume shops, electronics retailers, shoe stores, lingerie stores and stores that have “import” or “export” in their company name.
Any wide-scale law enforcement effort, many be overbroad and affect innocent business owners. A tax attorney experienced in defending those charged with financial crimes can provide guidance on compliance.
Source: Los Angeles Times, "Fashion district crackdown: Strict cash reporting ordered after raids," Victoria Kim, Oct. 2, 2014