<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Darryl Parsons:
I'm no lawyer or accountant (actuary..is that close enough? we prepare some really complex tax forms sometimes
) but I don't think the IRS has an income category for illegal income. <HR></BLOCKQUOTE>
I don't know about that. Maybe they do. Read on.
Money Laundering - Whose Business is it?
Dennis Crawford
Director, National Operations Division
IRS Criminal Investigation
(Published in the March 1998 issue of Banking Security magazine)
What is Money Laundering?
Money Laundering is a method used by individuals to try to make illegally gained or untaxed money appear to be legitimate by passing it through a legitimate bank or business.
"Why is IRS involved in Money Laundering?"
No matter what the source, all income earned, both legal and illegal, is taxable and has the potential of becoming involved in crimes which fall within the investigative jurisdiction of IRS Criminal Investigation (CI). When individuals or corporations attempt to corrupt the American system of taxation through fraudulent or illegal activities, CI special agents step-in to enforce the tax and money laundering laws. Financial investigations often lead right to the door of the drug kingpin, the fraudulent telemarketer, the money launderer, or corrupt individuals working in such professions as health care providers, political leaders, return preparers or even the local grocery store operator. In a financial investigation, CI special agents follow the movement of money through paper and computerized records. The link between where the money comes from, who gets it, when it is received and where it is stored or deposited, can provide proof of criminal activity and ultimately this proof can result in a conviction.
"Why are Banks Involved in Money Laundering?"
Since the inception of IRS Criminal Investigation in 1919, its mission has been to investigate financial crimes. And, one of the most effective tools for documenting financial crime has been information obtained from banks and other financial institutions. It is not surprising, then, that a unique and long-lasting partnership was developed years ago between the IRS and the banking industry. It is a partnership that took on more meaning in 1970 with the enactment of the Bank Records and Foreign Transactions Act ("Bank Secrecy Act") and later, in 1986, with the enactment of the Anti-Drug Abuse Act (which had substantive amendments to Title 31). Both acts required banks and other financial institutions to became even more involved in helping solve financial crimes by filing Currency Transaction Reports (CTRs), Suspicious Currency Transaction Reports, and Criminal Referral Forms (CRFs). On April 1, 1996, the suspicious activity reporting system went into effect, and the new Suspicious Activity Report (SAR) is now used in place of the CRF and the Suspicious Currency Transaction Reports.
No Smoking Gun!!
When IRS CI initiates an investigation, there is no smoking gun; no chalk outline of a body; no blood to test for DNA. Many IRS investigations begin with a simple piece of paper: a CTR, and more recently, a SAR.
The following examples demonstrate that the banks, their managers and employees have a very significant role in halting money laundering.
Bank Teller Testifies
In California, two Criminal Referral Forms (CRF) were filed by a financial institution. The CRFs reported that approximately $124,000 in currency had been deposited by an individual during two separate six week periods. The deposits were structured in amounts less than $10,000. According to the indictment, a bank teller told the IRS about a transaction in which she believed the individual was attempting to evade the monetary instrument recordkeeping requirement because the individual attempted to purchase two cashier’s checks, each for less than $3,000, in two separate transactions. The individual told the teller that by conducting the transaction in this manner, the teller would not have to complete the monetary instrument log. The teller refused to complete the transaction and informed him that she would be recording the transaction in the monetary instrument log.
Armed with this valuable information from the bank, IRS initiated an investigation that, according to the indictment, led to a U.S. ****** worker whose annual salary was $40,000. The IRS and ****** Inspector’s investigation ended with the conviction of the ****** employee who embezzled approximately $815,000 from the U.S. ****** Service.
The indictment stated that in an effort to keep authorities from discovering his embezzlement, the individual attempted to launder money diverted from the ****** bulk mail customers and structure his bank deposits to avoid the filing of Currency Transaction Reports. The U.S. Attorney dubbed it the largest embezzlement in U.S. ****** history.
The ****** worker was sentenced to 41 months in prison and ordered to pay more than $815,000 in restitution.
Bank Manager Stops Money Laundering at Auto Dealership
In Massachusetts, an owner of an auto dealership was found guilty of structuring cash transactions. The IRS special agent’s affidavit, filed with the court, stated that the auto dealership owner called the bank to complain that the bank was "harassing his employees" by filing out a Currency Transaction Report (CTR). The affidavit further explained that the owner instructed his employees to "break up" the daily cash receipts to keep cash deposits below the $10,000 threshold and repeat the process over and over again.
According to the indictment, the IRS met with the Bank’s branch manager who advised that the bank became suspicious of the cash deposits and began preparing CTRs for all large cash deposits, even if the amount deposited was less than $10,000. The branch manager agreed to continue preparing CTRs documenting each suspicious cash deposit. A total of $2,188,590 in structured deposits was documented by 136 CTRs.
At sentencing, in addition to jail time, the Massachusetts auto dealership owner was ordered to forfeit $361,000 worth of American automobiles and funds.
Bank Suspicious of Structuring Transactions
A Bank in Boston filed a Criminal Referral Form (CRF) with IRS alleging that one of its customers was structuring the depositing of checks to evade the currency reporting requirements. The CRFs, documented in the indictment, listed 17 transactions conducted by a local bar which totaled over $150,000 in a 25 day period. According to the indictment, these deposits led to one of the largest stolen goods organizations operating in the US. The organization dealt almost exclusively in the over-the-counter pharmaceutical and other items carried in drug stores. This was a ring of professional shoplifters who stole drug store items, fenced them to a middle man who then sold the stolen items to a distributor. The two ringleaders were charged with racketeering, money laundering, tax fraud, mail and wire fraud and conspiracy.
New SAR Stops Illegal Money Transmitting Business
One the nation’s largest banks located in New York filed a Suspicious Activity Report (SAR) indicating that an individual had made a series of apparent structured deposits. According to the indictment filed with the court, each deposit was slightly under the $10,000 reporting threshold. After depositing the currency to his account, the individual completed a wire transfer request to the Philippines in the exact same amount. The SAR indicated that the individual claimed to be a money remitter. The indictment states that further investigation revealed that his license was suspended for failing to comply with the state licensing requirements. He subsequently plead guilty to USC 18 1960, operation of an illegal money transmitting business, was sentenced to probation and forfeited $100,000.
Bankers Uncover Narcotics Trafficking
Currency Transaction Reports filed by several banks uncovered a businessman who had attempted to profit from the narcotics industry. Several CTRs indicated that an office clerk was depositing large sums of currency in bank accounts. According to the indictment, the CTRs indicated that the clerk provided different addresses and social security numbers on the CTRs. The indictment further explained that the clerk was attempting to hide the fact that the business owner operated several businesses that catered to narcotics traffickers. The CTRs provided valuable leads to identify bank accounts and assisted with the probable cause needed to obtain a search warrant. A luxurious home and more than $10,000 of drug money was seized. The clerk and business man pled guilty to conspiring to evade income taxes.
Detroit Data Center Finds Fraud
Computer print-outs generated by the IRS Detroit Data Center showed numerous Suspicious Currency Transaction Reports being filed by various Western Union outlets in the Virginia area. An investigation led to the identification of a number of individuals involved in "smurfing" activity of conducting financial transactions under $10,000 to avoid the reporting requirements. Following the money led directly to the leaders of a multimillion-dollar marijuana operation based in Virginia and California.
Whose Business is it?
Money laundering is not a victimless crime: Not only are innocent people "duped" by various schemes, but the underground economy (which is untaxed) continues to grow. Understandably, the amount of tax revenue collected is a barometer of the overall economic strength of our nation and helps reduce our nation’s financial deficit.
The financial institutions and the IRS already know that money laundering is every one’s business.
published March 1998
http://www.ustreas.gov/irs/ci/articles/docmoneylaunderingbus.htm
