The government assumes that depositing amounts over $10,000 in a bank account is inherently suspect and must be documented and investigated to ensure that the money was not obtained illegally. The law against "structuring" is premised on the idea that anyone who deposits less than $10,000 in a bank account must be trying to evade the first law, trying to disguise the illegal money as legal money. If you're caught doing either of these things, that is, depositing more (or less) than $10,000 at a time, they get to take your money, without having to prove (and in some cases, it seems, without even claiming) that you've done anything illegal or wrong.
Well, here's some good news for a change. This article on the subject claims that after a call from the NYT asking about this ploy (which has been going on for years and years) the IRS began to have second thoughts, and contritely announced that it would "curtail the practice" of summarily seizing innocent people's money on a technical pretext just because they could and focus instead on "cases where the money is believed to have been acquired illegally".
Well, yes, in retrospect I suppose, focusing on cases where there was no indication whatsoever that anything illegal was occurring and stealing innocent people's money anyway may not have been the most defensible policy. The party's over, apparently, thanks to a well-placed question from the New York Times. (Maybe they could call the DEA and ask them about the drug war, too. I see lots of wonderful possibilities here.)
As Megan McArdle points out, this practice is (or, was, I suppose I should say, now that the New York Times has put a stop to it) but a facet of a much greater civil forfeiture problem, and she likens the process to that illustrated in the song about the old lady who swallowed the fly:
So think about what has happened to our government agencies. We passed a law, to raise taxes, or curb the usage of addicting drugs. That law didn’t work as well as we wanted, because a lot of people were evading it. So we passed new laws, to make it easier to enforce the original one, like requiring banks to report all transactions over $10,000. And then people evaded that, so we made another rule … and now people who had no criminal intent find themselves coughing up tens of thousands of dollars they shouldn’t owe...As in the case of the fly, we were better off leaving the original ailment alone. No, I’m not saying that we shouldn’t try to catch tax evasion. I’m saying we shouldn’t try so hard that we end up criminalizing a lot of innocent behavior. There are worse things than a country with some tax fraud. And one of those things is a government with vast and arbitrary power to punish people who have done no wrong.