CBP Sued Over Currency Seizure Practice

[Note: Updated to properly identify the organization supporting the litigation.]

I often tell students and other lawyers that the great thing about my practice is the lack of human drama. In most cases, getting to the right result in a dispute with Customs and Border Protection is about knowing the law and making sure everyone applies it properly to the facts. Usually, no one cries and rarely is anyone subject to imprisonment.

But, that is not always the case. One thing we do in my office is help people with currency seizures. Just to be 100% clear on this: It is illegal to bring over $10,000 in or out of the country without declaring it to Customs. This is very useful information for law enforcement on a number of fronts. The money might be from illegal activity, it might be going to support terrorist organizations, it might be part of a money laundering scheme.

When entering the country, there is an obvious time and place to make this declaration. If you are using a paper declaration form, it is right there as 13: "I am (We are) carrying currency or monetary instruments over $10,000 U.S. or foreign equivalent. Yes. No." On the other hand, when leaving the country, no one asks that question. Many people do not know there is an obligation to report when leaving the country. Those who do may find it hard to find the actual CBP office where the declaration needs to be made and get there in close proximity to the time for a departing flight.

What you need is a FinCEN 105 form. According to the instructions, travelers "shall file FinCEN Form 105 at the time of entry into the United States or at the time of departure from the United States with the Customs officer in charge at any Customs port of entry or departure." If this is relevant to you, call the general number at the port you will be transiting and ask for the correct location to make the declaration. Then, ask yourself why you feel the need to carry a bundle of cash.

I have seen this process cause grief several times. In most cases, if the traveler can prove a legal source of the funds, he or she can secure the release of much of the seized funds. But, not always. If the evidence of lawful sources is unclear or if there are aggravating factors such as efforts to conceal the currency or lying to Customs, the funds or a portion of them may be forfeited.

For the average person, the requirements and then the civil asset forfeiture process can be difficult to navigate. And, honestly, the Customs people who are the front line on this issue are not always as clear and respectful as one would hope.

Another problem is that CBP will not release the seized currency unless the traveler signs an agreement stating that it will not take any legal action against CBP. This is called a hold harmless agreement. According to CBP practice, if the traveler fails to sign the hold harmless agreement, CBP will start administrative forfeiture procedures. Translated to English, that means CBP will use the money as leverage to get itself out of any potential legal jeopardy.

The problem is that the seizure may have actually violated the rights of the traveler. Signing the hold harmless agreements means the traveler gives up the ability to challenge the seizure or seek damages for an unlawful seizure. That means, for example, waiving arguments that the seizure was an unconstitutional taking, violated the fourth amendment's protection against unlawful seizure (but see this discussion), or was otherwise unlawful. Moreover, it means that if CBP delays or otherwise fails to return the money in a timely manner, the traveler gives up his or her first amendment right to petition the government for redress of that claim.

This is the issue in a recently filed class action law suit challenging the requirement for a hold harmless agreement. Thanks to Clif Burns'  Export Law Blog for the tip.

The case is brought by the Institute for Justice. According to its website, "IJ litigates to limit the size and scope of government power and to ensure that all Americans have the right to control their own destinies as free and responsible members of society." Here is the IJ description of the case.

The underlying seizure involved a passenger heading to Nigeria who failed to disclose that she was carrying a little over $41,000. The passenger was a nurse who had saved much of the money to open a clinic in Nigeria. The remainder was from family sources and was to be delivered to her family in Nigeria. Not that is matters, but she was born in Nigeria and became a U.S. citizen in 1994.

Customs seized the currency and gave her a Civil Asset Forfeiture election form on which she could tell CBP whether she abandoned the currency, would pursue an administrative process, or wanted the case referred to the Office of the U.S. Attorney for judicial proceedings. She requested the latter.

The U.S. Attorney did not act on the case within the time permitted. The legal consequence of this is that the money is to be returned to the traveler promptly. See 18 USC 983(a)(3)(B). Rather than promptly returning the funds, CBP sent the hold harmless agreement and informed her that the money would be returned in full when she signed and submitted the agreement. Rather than do that, she brought this action:

to put CBP’s policy or practice to an end, to void any Hold Harmless Agreements signed by class members as a result of this policy or practice, to recover [the named plaintiff's] seized cash and any other seized property that has not been returned to class members because they did not sign Hold Harmless Agreements, and to stop CBP from targeting her for additional, intrusive screening without giving her an adequate opportunity to challenge her classification.
One of the interesting things that is likely to come out of this case is some data on how often these seizures happen. More important, how often does CBP make a seizure that the U.S. Attorney does not pursue?

This latter question is of practical importance to lawyers who deal with seizures. If it turns out that Assistant U.S. Attorneys more often than not do not pursue civil forfeitures, then maybe it does not pay to go through the CBP administrative forfeiture process. That process is slow and it is not always clear who is making or influencing the decision. There is also the perception (and it may just be the perception) that once the seizure train starts, it is very hard to stop before it arrives at a forfeiture. There are lots of reason for this including some degree of CBP deference to port-level enforcement.

The problems are often more acute when merchandise other than currency is seized. This is because it is not always easy to figure out what storage fees might be incurred. At some point, storage can be more expensive than the value of the merchandise and the expense of hiring counsel who is familiar with the process. Importers will often cut their losses by abandoning the merchandise rather than fight what might be an unjustified seizure.

This is a case to watch. The fact that it is being brought as a class action and supported by a non-governmental partisan entity means it is less likely to go away with a quiet settlement. This case is clearly addressed to a bigger picture idea. CBP could, of course, make it go away by issuing the refund and by changing its practice.

I also think there is an issue here for Congress. As long as the law requires the declaration, there should be a clear means of doing so. Congress should require that ports (including the domestic terminals of airports from which international flights leave) prominently post the requirement to report. Furthermore, the airlines, cruise lines, and other carriers should be required to distribute the forms. In the alternative, CBP and FinCEN (the Financial Crime Enforcement Network) should make it possible to file the form online some reasonable time before departure. Seriously, we don't need people getting caught up in this for no reason other than a lack of knowledge. Moreover, we do not need to have knowledgeable travelers wandering around airports trying to find a CBP office to submit the form.

That may not fit with the Institute for Justice goal of limited government, but that's not my goal here.

Comments

Unknown said…
Great post Larry, and so true. I have seen Customs currency seizures under the administrative option where Customs held onto the money for over two years. An issue with seized currency over $10,000 when leaving the U.S. is whether it is drug money, or money that has never seen the inside of a U.S. bank.
Unknown said…
Great post Larry. I have seen currency seizures from people leaving the U.S. where the administrative route option was chosen and Customs has held onto the money for over two years.

Under the relevant statutes, the primary concern for people leaving the U.S. with over $10,000 in undeclared cash is whether that money is drug trade money which has never gone through a U.S. financial institution such as a bank.

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