Need for focused and consistent enforcement drove IRS decision to stop seizing ‘structured’ deposits, official says

November 14, 2014

The Internal Revenue Service’s recent decision to stop using civil enforcement powers to seize legitimate money deposited into bank accounts in a clandestine manner stemmed from a review process that revealed a need to make better use of agents’ time, the law enforcement official who enacted the new policy said Sunday at a money laundering conference in Washington.

Richard Weber, chief of the Internal Revenue Service – Criminal Investigation (IRS-CI) said that “many, many months ago” he launched a review of agents who pour through so-called Suspicious Activity Reports (SARs) filed by banks to see if the agents were spending their time wisely. He disputed speculation that the policy change came in response to a New York Times report on the agency’s seizure practices. 

Institutions are required to file SARs when they encounter activity that appears linked to criminal schemes, including the crime of “structuring,” which is when someone makes multiple cash deposits – instead of a single one – to sidestep a requirement that banks report all cash transactions involving more than $10,000.

“One of the things that I recognized on reviewing some of our cases and statistics is we’re not filing as many criminal cases as I would want to file,” Weber told the audience of compliance officers gathered for the American Bankers Association event.

He added that IRS-CI has seen its budget shrink and now has about 2,600 agents in its 25 field offices across the country. He noted that is about the same number of agents IRS-CI had in 1972.

“We’re at an all-time low when it comes to agent resources. So I need to make sure we are doing the best cases, the best criminal cases, in our priority areas,” Weber said.

Banks file many thousands of SARs on apparent structuring, which can lead to a felony criminal conviction as well as civil forfeiture of the money involved, even if the funds were generated by legal business. Weber referred to structuring involving legitimate money – as opposed to drug proceeds or other dirty money – as “legal source structuring.”

IRS-CI agents who reviewed the bank reports were in some instances using civil authorities to seize legal source money rather than holding out for the best cases and pursuing criminal convictions, Weber said.

“We are doing seizure cases on these structuring SARs and I want to make sure that we’re filing good criminal cases,” Weber said.

He added that the fact that some federal prosecutors are willing to pursue civil seizure warrants in legal source structuring cases, but others are not, exacerbated IRS-CI’s inconsistent treatment of the matter.

“(Agents) may go to one U.S. Attorney’s Office that will not work a legal source structuring seizure and another office that will work it. I thought it was important for a national agency with national priorities to have one consistent policy for all of our 25 field offices regardless of what the U.S. Attorney or Department of Justice policy may be,” he said.

IRS-CI’s new policy was discussed with all senior agents – special agents in charge and assistant special agents in charge – at a meeting in September before being made effective last month, Weber said.

Weber said he took issue with a New York Times article published late last month, which first revealed IRS-CI had adopted a new policy of not using civil powers to seize legal source funds. He said the article suggested the policy was prompted by the Times’ inquiries regarding the seizure of money belonging to several people who earned it legally but made structured deposits at banks. While legal, critics say this practice is unfair as people who lack resources for a legal battle are bullied into giving up their money.

“I’m not sure how many of you have worked for a government agency (or the IRS), but one thing I can tell you after the two and a half years I have been there, it’s impossible to effectuate a policy in a day, it just doesn’t happen. Truth be told … that policy has been in the works for months,” Weber said.

He also had a simple message for banks: SARs remain valuable investigative tools.

“If we look at a SAR that involves structuring … we’re going to investigate it. If all we see is legal source structuring not connected to tax evasion … and it’s not connected to illegal activity, IRS-CI is not going to do that seizure on the front end. We’re still going to investigate it and we’re going to try to make it into a criminal case and we may do a seizure at a later time,” he said.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Accelus compliance news on Twitter: @GRC_Accelus)

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