This section outlines guidelines which apply to LMSB.

Active involvement of the team manager is essential to the success of a fraud referral. When an examiner suspects a potentially fraudulent situation, the employee will discuss the case at the earliest possible convenience with his/her manager. To further assist field personnel in identifying and developing criminal fraud referrals, SB/SE Compliance established groups of fraud referral specialists (FRS) to assist technical personnel in all IRS operating divisions.

The detection and deterrence of fraud is every compliance employee's responsibility and should be a top priority when discovered. Any questions regarding LMSB fraud procedures should be referred to your respective industry fraud analyst.

Team Managers should contact their local FRS Group Manager when indications of fraud are uncovered during an examination. A list of FRS's and their managers may be found on the National Fraud Program web site at <http://www.taxfraud.web.irs.gov/>. Upon discussion of the case facts and potential fraud indicators with the FRS Group Manager, an FRS may be designated to assist with the development of the fraud issues(s). The FRS's are trained fraud experts and can provide invaluable assistance in fraud identification and development.

When firm indications of fraud are present, a referral to CI will be prepared using Form 2797. Refer to IRM 25.1.3.2 for information in preparing Form 2797. All criminal referrals must be routed through the FRS Group Manager for review, concurrence and forwarding to the new Criminal Investigation Lead Development Center (LDC).

The CI Lead Development Centers will screen incoming referrals to determine if they meet CI’s criminal criteria, have any barriers to prosecution and support CI’s workplan. If a referral does not meet the criminal criteria or there is a barrier to prosecution or there is a question as to whether the referral supports CI’s "workplan," the LDC manager will follow the guidance contained in IRM 25.1.3.5 and return the referral to LMSB through the FRS manager. If the referral meets the criminal criteria, there are no barriers to prosecution and the referral supports CI’s workplan , the LDC will immediately forward the referral to the appropriate CI field office for evaluation.

Within 10 workdays of the receipt of the referral by the evaluating field office, CI will contact the referring (team) manager to schedule and conduct an initial conference and to obtain additional information such as listed in IRM 25.1.3.3(4) and 25.1.3.4(3). Within 30 workdays of the receipt of the referral by the evaluating field office, the parties will meet again at a disposition conference to discuss CI’s decision to accept or decline the referral. CI will provide feedback to LMSB as to their decision. If accepted, CI will follow the guidance contained in IRM 25.1.3.4. If declined, CI will follow the guidance contained in IRM 25.1.3.5.

Civil Fraud no longer requires a referral to CI. The determination of this penalty is a shared responsibility of both the examiner and his/her team manager. However, FRS's and FRS Group Managers are available for assistance. Furthermore, in statutory notice cases, Area Counsel must still approve the civil fraud penalty prior to the issuance of the notice.

Potential "third party" examinations that may have indications of fraud should be either secured for examination by the LMSB team or routed through the local SB/SE Area PSP Office via Form 5346, Examination Information Report.