What is structuring, and is it illegal even if the money is legitimate?

Yes. Structuring is prohibited when the purpose is to evade the currency transaction reporting requirements, and the rule does not make the source of the funds an element, so legitimate money gives no exemption.

What the rule says:

• No person may, for the purpose of evading the currency transaction reporting requirements, cause or attempt to cause a domestic financial institution to fail to file a required report (31 CFR 1010.314(a)), or to file one with a material omission or misstatement of fact (31 CFR 1010.314(b)).
• No person may structure or assist in structuring, or attempt either, any transaction with one or more domestic financial institutions (31 CFR 1010.314(c)).
• A person structures a transaction by conducting or attempting to conduct one or more currency transactions, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evasion. Alone or with or for others counts. This includes breaking a sum over $10,000 into smaller sums, or conducting a series of currency transactions at or below $10,000 (31 CFR 1010.100(xx)).
• The transactions need not exceed $10,000 at any single institution on any single day (31 CFR 1010.100(xx)).

What we would look at:

• Was physical currency involved? A bank check, bank draft, wire transfer or other written order with no physical transfer of currency is not a transaction in currency for these reporting provisions (31 CFR 1010.100(bbb)(2)). Any cash leg remains covered.
• Is there a pattern of currency transactions at or below $10,000, across institutions or days?
• Did anyone, including staff, help or cause a missed or inaccurate report?
• What facts show a purpose to evade?

Check separately for penalties and how intent is proven.

Sources

1. 31 CFR §§ 1010.314(a)-(c), 1010.100(xx): https://www.law.cornell.edu/cfr/text/31/1010.100
2. 31 CFR 1010.314 (eCFR): https://www.ecfr.gov/current/title-31/section-1010.314
3. 31 CFR 1010.100 (eCFR): https://www.ecfr.gov/current/title-31/section-1010.100

This answer is general information, not legal advice. Forteris is not a law firm.