While we normally focus exclusively on sanctions here at Sanction Law, it’s important to recognize sanctions and money laundering are inextricably linked. Criminal prosecutions for sanctions violations usually include money-laundering charges as well and the massive sanctions settlements with foreign financial institutions almost always include a money laundering component.

So when the news broke that Speaker of the House Dennis Hastert had been indicted on charges of structuring transactions and lying to investigators, it had an air of familiarity about it. According to the indictment, the illicit conduct stemmed from an effort to compensate an individual for unnamed “prior bad acts.”

During the 2010 meetings and subsequent discussions, defendant JOHN DENNIS HASTERT agreed to provide Individual A $3.5 million in order to compensate for and conceal his prior misconduct against Individual A.

It seems pretty obvious that despite serving as Speaker of the House and knowing he was about to shell out $3.5 million in hush money, Hastert didn’t do his money laundering homework. He definitely did not have a good grasp on the Bank Secrecy Act, the role of the Financial Crimes Enforcement Network, or currency transaction reporting:

From approximately June 2010 through April 2012, defendant JOHN DENNIS HASTERT made fifteen $50,000 withdrawals of cash from bank accounts he controlled at Old Second Bank, People’s State Bank and Castle Bank and provided that cash to Individual A approximately every six weeks.

Title 31, United States Code, Section 5313(a) and Title 31, Code of Federal Regulations, Section 1010.310-313 required domestic financial institutions to prepare and file with the Financial Crimes Enforcement Network a Currency Transaction Report (Form 104) for any transaction or series of transactions involving currency of more than $10,000.

Oops. That many large, identical withdrawals was almost certain to set off internal alarms at Hastert’s bank eventually, which they did.

In approximately April 2012, pursuant to bank policy and federal regulations, bank representatives questioned defendant JOHN DENNIS HASTERT about the $50,000 cash withdrawals that he had made.

In July 2012, defendant JOHN DENNIS HASTERT began withdrawing cash in increments of less than $10,000.

Making sure your cash withdrawals or deposits stay under the $10,000 reporting requirement is called “structuring” or “smurfing” and is Money Laundering 101. It’s also a violation of 31 U.S.C. § 5324 and punishable by up to 5 years in prison.

When Hastert changed up his routine in order to ensure he remained underneath the $10,000 reporting requirement, it’s a good bet that one or more of his banks filed a Suspicious Activity Report (“SAR”) with FinCEN. Under the Bank Secrecy Act, financial institutions are required to file SARs on suspicious activity that might signify money laundering, tax evasion, or other criminal activities. Going from $50,000 withdrawals to sub-$10,000 withdrawals would likely qualify.

Hastert then made the mistake of lying to federal investigators, a felony violation of 8 U.S.C. § 1001 (also the reason why you should never lie to OFAC when responding to an administrative subpoena).

Moral of the story, if you’re going to illicitly withdraw millions to keep someone quiet, you should probably do some basic research on money laundering and just use a Delaware shell like other launderers.

UPDATE: As our good friend Scott Kinney points out, smurfing generally involves having others make small deposits in order to avoid reporting requirements. The post has been updated to reflect this.