Federal Transaction Reporting Requirements

When you attempt to execute a financial transaction at your local bank, you will likely at some point or another encounter a situation where you will be told that your bank is required by federal law to report your transaction to the federal government because it exceeds $3,000 in value.  The bank will tell you that this is a requirement imposed by the Bank Secrecy Act (BSA).  This article will clearly show that the Bank Secrecy Act, like the Internal Revenue Code, only applies on federal property and inside the federal zone and only to those engaged in a "trade or business" which in all cases is synonymous ONLY with a public office.  This article will give you facts and cites to provide to your bank to refute their erroneous claim that the federal government has a right within the sovereign 50 states to invade your privacy and require you to be a witness against yourself (in violation of the Fifth Amendment) by reporting your financial transactions to the federal government.

Article 1, Section 8 of the U.S. Constitution gives the federal government two specific powers relating to money.  The Congress shall have the Power...:

The statutes which derive from the above powers related to transaction reporting by financial institutions are summarized below.  You will note that these reporting requirements exceed the powers granted explicitly in the constitution to the U.S. government and are therefore questionable in their delegated authority from the beginning:

With all of the above in mind, now lets examine the jurisdiction of the federal courts to enforce these laws.  We will start with a now outdated statute at 40 U.S.C. §255, which says in effect that the U.S. government only has jurisdiction to enforce federal laws within the sovereign 50 states on land that was ceded in writing by the state to the federal government.  This statute has since been replaced with 40 U.S.C. §3112 which accomplishes the same result. Since most banks inside the states do not occupy federal land, then they aren't under the jurisdiction of the federal government.  Here is that section:

TITLE 40 > CHAPTER 3 > Sec. 255.
Sec. 255. - Approval of title prior to Federal land purchases; payment of title expenses; application to Tennessee Valley Authority; Federal jurisdiction over acquisitions

Unless the Attorney General gives prior written approval of the sufficiency of the title to land for the purpose for which the property is being acquired by the United States, public money may not be expended for the purchase of the land or any interest therein.

The Attorney General may delegate his responsibility under this section to other departments and agencies, subject to his general supervision and in accordance with regulations promulgated by him.

Any Federal department or agency which has been delegated the responsibility to approve land titles under this section may request the Attorney General to render his opinion as to the validity of the title to any real property or interest therein, or may request the advice or assistance of the Attorney General in connection with determinations as to the sufficiency of titles.

Except where otherwise authorized by law or provided by contract, the expenses of procuring certificates of titles or other evidences of title as the Attorney General may require may be paid out of the appropriations for the acquisition of land or out of the appropriations made for the contingencies of the acquiring department or agency.

The foregoing provisions of this section shall not be construed to affect in any manner any existing provisions of law which are applicable to the acquisition of lands or interests in land by the Tennessee Valley Authority.

Notwithstanding any other provision of law, the obtaining of exclusive jurisdiction in the United States over lands or interests therein which have been or shall hereafter be acquired by it shall not be required; but the head or other authorized officer of any department or independent establishment or agency of the Government may, in such cases and at such times as he may deem desirable, accept or secure from the State in which any lands or interests therein under his immediate jurisdiction, custody, or control are situated, consent to or cession of such jurisdiction, exclusive or partial, not theretofore obtained, over any such lands or interests as he may deem desirable and indicate acceptance of such jurisdiction on behalf of the United States by filing a notice of such acceptance with the Governor of such State or in such other manner as may be prescribed by the laws of the State where such lands are situated. Unless and until the United States has accepted jurisdiction over lands hereafter to be acquired as aforesaid, it shall be conclusively presumed that no such jurisdiction has been accepted

Now if we look at the definition of "State" within the context of the jurisdiction of the federal courts, we find the following in 28 U.S.C. §1332(d):

TITLE 28 > PART IV > CHAPTER 85 > Sec. 1332.

Sec. 1332. - Diversity of citizenship; amount in controversy; costs

(a)  The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between -

  (1) citizens of different States;

  (2) citizens of a State and citizens or subjects of a foreign state;

  (3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and

(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.

For the purposes of this section, section 1335, and section 1441, an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled.

(b)  Except when express provision therefor is otherwise made in a statute of the United States, where the plaintiff who files the case originally in the Federal courts is finally adjudged to be entitled to recover less than the sum or value of $75,000, computed without regard to any setoff or counterclaim to which the defendant may be adjudged to be entitled, and exclusive of interest and costs, the district court may deny costs to the plaintiff and, in addition, may impose costs on the plaintiff.

(c) For the purposes of this section and section 1441 of this title -

  (1) a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business, except that in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business; and

  (2) the legal representative of the estate of a decedent shall be deemed to be a citizen only of the same State as the decedent, and the legal representative of an infant or incompetent shall be deemed to be a citizen only of the same State as the infant or incompetent.

(d) The word ''States'', as used in this section, includes the Territories, the District of Columbia, and the Commonwealth of Puerto Rico

Note in the above that the sovereign 50 states of the union of states are not "States" as defined above, they are "foreign states".  Let's examine this "foreign state" concept further.  What follows is a definition of the term "foreign state" right out of Title 28, which is the title that regulates the authority of the Judiciary.  We have boldface underlined the portion of the cite that shows that sovereign states of the union of states are "foreign states":

TITLE 28 > PART IV > CHAPTER 97 > Sec. 1603.
Sec. 1603. - Definitions

For purposes of this chapter -

(a) A ''foreign state'', except as used in section 1608 of this title, includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

(b) An ''agency or instrumentality of a foreign state'' means any entity -

  (1) which is a separate legal person, corporate or otherwise, and

  (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and

  (3) which is neither a citizen of a State of the United States as defined in section 1332 (c) and (d) of this title, nor created under the laws of any third country.

(c) The ''United States'' includes all territory and waters, continental or insular, subject to the jurisdiction of the United States.

The federal courts therefore have no jurisdiction inside of "foreign states" defined above, which means in the 50 states and outside the federal zone, unless the parties on both sides of the dispute meet the jurisdictional requirements of 28 U.S.C. §1332.  These conclusions are consistent with Article 1, Section 8, Clause 17 of the Constitution, which gives exclusive legislative jurisdiction to the federal government only within the District of Columbia and areas within the "foreign states", that is the 50 states, specifically ceded by the respective state government to the federal government.

Once we understand the jurisdictional limitations of the federal government, then we can examine all federal legislation it passes with the assumption that it only applies within this limited jurisdiction, unless a contrary intent is clearly communicated:

“A canon of construction which teaches that of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.”
[U.S. v. Spelar, 338 U.S. 217 at 222 (1949)]

If all that isn't enough for you, consider that there are only two types of currency transactions that are reportable under Title 31 of the United States Code are for those people engaged in a "trade or business" in the United States.  The term "trade or business" as used in Title 31 of the U.S. Code has exactly the same meaning as that used in the Internal Revenue Code (IRC):

Title 31: Money and Finance: Treasury
PART 103—FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND FOREIGN TRANSACTIONS
Subpart B—Reports Required To Be Made

103.30   Reports relating to currency in excess of $10,000 received in a trade or business.

(11) Trade or business. The term trade or business has the same meaning as under section 162 of title 26, United States Code.

The Internal Revenue Code, 26 U.S.C. §162 then defines "trade or business" by building on the definition found in 26 U.S.C. 7701(a)(26), which is only the "functions of a public office":

26 U.S.C. §7701(a)(26)

"The term 'trade or business' includes the performance of the functions of a public office."

Below are the only two types of currency transactions that require reporting under Title 31 of the U.S. Code:

  1. Transactions involving a person engaged in a "trade or business".  See 31 C.F.R. §103.30(d)(2). Which says:

    31 C.F.R. §103.30(d)(2) General

    (2) Receipt of currency not in the course of the recipient's trade or business. The receipt of currency in excess of $10,000 by a person other than in the course of the person's trade or business is not reportable under 31 U.S.C. 5331.

  2. Transactions involving a person engaged in a "non-financial trade or business".  These transactions are a subset of those involving a "trade or business" above.  See 31 U.S.C. §5331 below for the only types of reportable "nonfinancial trade or business" activity.  Notice that financial activity not associated with a "trade or business" is not included:

    TITLE 31 > SUBTITLE IV > CHAPTER 53 > SUBCHAPTER II > 5331

    5331. Reports relating to coins and currency received in nonfinancial trade or business

    (a) Coin and Currency Receipts of More Than $10,000.—Any person—
    (1) who is engaged in a trade or business; and
    (2) who, in the course of such trade or business, receives more than $10,000 in coins or currency in 1 transaction (or 2 or more related transactions),
    shall file a report described in subsection (b) with respect to such transaction (or related transactions) with the Financial Crimes Enforcement Network at such time and in such manner as the Secretary may, by regulation, prescribe.

Both of the above have as a prerequisite a "trade or business".  The term "nonfinancial trade or business" is based on the term "trade or business" defined earlier as follows:

TITLE 31 > SUBTITLE IV > CHAPTER 53 > SUBCHAPTER II > 5312

5312. Definitions and application

(4) Nonfinancial trade or business.— The term “nonfinancial trade or business” means any trade or business other than a financial institution that is subject to the reporting requirements of section 5313 and regulations prescribed under such section.

Consequently, the only people who any financial institutions WITHIN the federal zone must make any kind of currency report for is an elected or appointed officer of the United States Government, which is what a "public office" is.  Financial institutions not within the federal zone need not make any currency transaction reports at all, even if they are dealing with elected or appointed officers of the United States government!

As a result of the analysis above, if you are conducting a transaction that your financial institution thinks needs to be reported, please demand proof from them that you are engaged in a "trade or business" FIRST, and show them the definition of "trade or business" before they answer the question.  As a matter of fact, show them this article and ask them to rebut it!

Copyright Family Guardian Fellowship Last revision: 8/16/09
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