The stated mission of Criminal Investigation (CI) is to “serve the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.” (Internal Revenue Manual (IRM) Section 188.8.131.52 (09-10-2008). On the near-term horizon, Structuring Investigations of criminally derived income (illegal income) will take the forefront according the Chief of Criminal Investigation (CI), Richard Weber.
As a result of the potential misuse of the Structuring Law under Title 31 USC 5317(a) in legal income cases, the CI Chief Weber advised The New York Times on October 25, 2014 the following:
“After a thorough review of our structuring cases over the last year and in order to provide consistency throughout the country (between our field offices and the U.S. attorney offices) regarding our policies, I.R.S.-C.I. will no longer pursue the seizure and forfeiture of funds associated solely with “legal source” structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the Director of Field Operations (D.F.O.) level. While the act of structuring — whether the funds are from a legal or illegal source — is against the law, I.R.S.-C.I. Special Agents will use this act as an indicator that further illegal activity may be occurring. This policy update will ensure that C.I. continues to focus our limited investigative resources on identifying and investigating violations within our jurisdiction that closely align with C.I.’s mission and key priorities. The policy involving seizure and forfeiture in “illegal source” structuring cases will remain the same.” Article – Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required. October 25, 2014.
According to the above letter from the Chief CI, it appears that seizures under Title 31 USC 5317(a) will have less impact than in the past on the average non-criminal citizen with legal income deposited in a structured manner. Special Agents will have to do more than look at Financial Crimes Enforcement Network (FinCEN) reports to determine if structuring of deposits is taking place. They will have to do an actual investigation that includes contacting and interviewing bankers and identifying confidential sources and law enforcement agencies to determine if the money deposited is a nexus to illegal activity. A little known fact is that the Special Agent conducting a Title 31 investigation cannot access the income tax system as he would normally. Under the Title 26 USC 7602 the Special Agent is not allowed access for the purpose of seizing money under a separate title. Reporting from the banking community will continue to FinCEN including the Currency Transaction Report and Suspicious Activity Reports.
The bottom line is that small business owners should rest easier but never fail to maintain records that can prove the source of their deposits. When you need to efficiently and quickly follow the money and analyze complex financial data to find the facts, call Sage Investigations, LLC. at 512-659-3179 and let our 26 years of experience as an IRS Special Agent work for you.