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The Importance of Bank Secrecy Act Data in IRS Criminal Investigations of Tax Crimes

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    The IRS Criminal Investigation (CI) unit is responsible for conducting financial crime investigations, including tax fraud, money laundering, public corruption, and more. There are several methods that they may use to uncover financial crimes. However, the data available to CI through the Banking Secrecy Act (BSA) has proven to be one of their most powerful tools in uncovering instances of tax evasion.

    CI relies heavily on BSA data, with nearly 88% of its criminal tax investigations in fiscal year 2023 involving individuals or entities with a BSA filing. BSA data has proven instrumental in allowing CI to execute substantial asset seizures and secure increased convictions. With a federal conviction rate of nearly 90% and a presence across the U.S. and internationally, CI is dedicated to prosecuting tax criminals and maintaining the integrity of the financial system.

    If you need help resolving your civil or criminal tax exposure issues, get help from our Dual-Licensed Tax Lawyers & CPAs by calling the Tax Law Offices of David W. Klasing today at (800) 681-1295 or click here to schedule a reduced rate initial consultation.

    IRS Criminal Investigation Unit’s Use of BSA Data

    IRS CI recently disclosed using Bank Secrecy Act (BSA) data in combating financial crimes, underscoring its effectiveness in investigations. According to CI, in fiscal year 2023, nearly 88% of the investigations initiated by the agency involved individuals or entities with a BSA filing. This highlights the critical role BSA data plays in uncovering financial wrongdoing across various sectors.

    Impact on Financial Crime Investigations

    From FY21 to FY23, CI reports that BSA data played a pivotal role in securing significant outcomes in financial crime investigations. Notably, it contributed to an average prison sentence of 39 months for convicted individuals and the seizure of $7.4 billion in assets linked to criminal activities. Furthermore, restitution orders totaling $434 million and forfeited assets totaling $629 million were attributed to BSA data, representing substantial increases compared to previous fiscal years.

    Diverse Application in Investigations

    CI Chief Jim Lee emphasized the versatility of BSA data in uncovering a wide array of financial crimes, including those related to COVID relief programs, skimming schemes, and employment tax fraud. Among investigations originating from BSA data in FY23, approximately 77% relied on information from suspicious activity reports, while 63.6% utilized data from currency transaction reports. Additionally, fraudulent Small Business Association loans tied to COVID relief programs, skimming incidents, and employment tax fraud constituted significant portions of investigations leveraging BSA data.

    CI’s Jurisdiction and Achievements

    As the law enforcement arm of the IRS, CI holds jurisdiction over a range of financial offenses, including tax fraud, narcotics trafficking, money laundering, and public corruption. Notably, CI boasts a federal conviction rate of nearly 90%, a testament to its effectiveness in prosecuting offenders. With 20 field offices across the United States and 12 attaché posts internationally, CI maintains a robust presence in combating financial crimes both domestically and abroad.

    Accordingly, if you are concerned that you may be accused of a tax crime, then you must seek legal support. Our Dual-Licensed Tax Lawyers & CPAs can help assess your case and identify the proper course of action. We will work diligently protect your interests and reduce or eliminate the potential penalties you face.

    What is the Banking Secrecy Act?

    The BSA is a U.S. federal law enacted in 1970 aimed at combating money laundering and other financial crimes. It requires financial institutions to assist government agencies in detecting and preventing money laundering by maintaining records of cash purchases over $10,000, filing reports of cash transactions exceeding this amount, and filing suspicious activity reports (SARs) for transactions that appear to be connected to illicit activities. The BSA also imposes requirements on financial institutions to verify the identity of customers and maintain effective anti-money laundering programs.

    Methods the IRS Criminal Investigation Unit Uses to Uncover Tax Crimes

    Ultimately, there are several strategies that the CI may use to uncover tax crimes. For instance, charges may stem from any of the following:

    Review of Tax Returns and Documentation

    IRS Criminal Investigation meticulously reviews tax returns and supporting documentation to detect discrepancies and irregularities that may indicate tax crimes. By cross-referencing reported income with other financial records and conducting thorough examinations of tax filings, CI can identify inconsistencies or fraudulent activities, laying the groundwork for further investigation and potential prosecution.

    Analysis of Offshore Accounts and Complex Financial Structures

    CI specializes in scrutinizing offshore accounts and complex financial structures utilized by individuals and entities to conceal income and evade taxes. Through comprehensive analysis of international financial transactions and collaborations with foreign tax authorities, CI can uncover hidden assets and income streams, exposing tax evasion schemes and holding perpetrators accountable for their actions.

    Cooperation with Informants and Whistleblowers

    CI may collaborate with informants and whistleblowers who provide insider information on tax crimes. These individuals, often with knowledge of fraudulent activities, can assist CI in gathering evidence and identifying key players involved in tax evasion schemes, enhancing the agency’s ability to investigate and prosecute offenders effectively.

    Surveillance and Undercover Operations

    In certain cases, CI may conduct surveillance and undercover operations to gather evidence of tax crimes. This may involve monitoring suspect individuals or businesses to observe their financial activities and interactions, providing CI with valuable insights into potential tax evasion or fraudulent behavior that can be used in criminal investigations and prosecutions.

    Partnerships with Other Law Enforcement Agencies

    CI frequently partners with other law enforcement agencies, both domestically and internationally, to uncover and combat tax crimes. By sharing information and resources, CI can leverage the expertise and capabilities of partner agencies to conduct comprehensive investigations, track down tax evaders, and bring them to justice.

    Monitoring Social Media Activity

    Finally, CI may monitor social media activity to gather intelligence and evidence related to tax crimes. By analyzing publicly available information, including posts, photos, and interactions, CI agents can identify individuals flaunting lavish lifestyles inconsistent with reported income or engaging in activities suggestive of tax evasion. This information can provide valuable leads for further investigations and enforcement actions against tax offenders.

    Contact Our Attorneys for Help with Your Tax Issue

    If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.

    Note:  As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.

    It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process.  Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

    Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

    As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth.   See our Testimonials to see what our clients have to say about us!

    We Are Here for You 

    Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.

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