I guess I don't understand the cash withdrawal from your own bank account part of it.
It's really goofy because the money doesn't have to be from ill gotten gains or used for an illegal purpose. But, there is a requirement that came about from the battles against organized crime and racketeering and is a way to prevent money laundering, at least that's how I understand it. The way it works is if there is a cash transaction of over $10,000, a bank is required to file what is called a cash transaction report with the government. It's really not that big a deal if everything is legit.
But if it isn't legit, people will deposit or withdraw in increments below that amount so that the transaction is not reported to the government. In other words if I want to take out $20,000 in cash, I could go in and take out $20,000 and there would be a CTR filed with the government saying I did that. But if I didn't want it reported to the government, I could take out 5,000 today, maybe 8000 the next day and so on so no on knows I did it.
I believe the Patriot Act or one of the similar new anti-terrorism acts placed more stringent rules on banks. I'm just looking into this, but banks have reacted by having computer programs that automatically generate a CTR (cash transaction report) for much lower amounts. The bank in my case generate one for anything over $3000. They aren't sent in, but it helps keep track of cash payments and withdrawals. Then banks will file a "suspicious activity report" with the government if they thing someone may be structuring (That's the word for trying to keep the amount below the reporting requirement by making several deposits or withdrawals).
The way I understand it, it was one of the suspicious activity reports that led to the government investigating Spitzer. They initially believed it may be some sort of bribe etc and discovered prostitution instead.
Does that help any? Bottom line, it's always the money trail that gets you. Income tax evasion, structuring etc.