4.26.15  General Program

Manual Transmittal

January 09, 2013

Purpose

(1) This transmits revised text for IRM 4.26.15, Bank Secrecy Act, General Program.

Material Changes

(1) Terms, titles, and IRM references have been updated.

(2) Citations from 31 CFR Part 103 were renumbered to 31 CFR Chapter X, effective March 1, 2011.

(3) New subsection 4.26.15.4.1 was added to discuss SAR access for Title 26 civil tax purposes, including mandatory training before access and the required minimum managerial audit trail reviews.

(4) New subsections under 4.26.15.6 were added to clarify the procedures for examiners who discover BSA issues in a Title 26 tax examination.

(5) New Exhibit 4.26.15-1, Comparison of Form 8938 and FBAR Requirements, was added.

Effect on Other Documents

This supersedes IRM 4.26.15 dated June 1, 2006

Audience

Intended audience is employees of the Small Business/Self Employed (SB/SE) division, and can be referenced by all field compliance personnel.

Effective Date

(01-09-2013)

William P. Marshall
Director, Fraud/BSA
Small Business/Self Employed

4.26.15.1  (01-09-2013)
Overview

  1. This section discusses administrative procedures and audit techniques that should be used by the general program income tax examiner working a case related to money laundering.

  2. The general program examiner should be aware of the information available on the Web Currency and Banking Retrieval System (WebCBRS), as well as the basic filing requirements of both the Bank Secrecy Act (BSA) and IRC Section 6050I.

  3. Examiners must also keep Title 31 (BSA) and Title 26 (IRC) activities separate.

4.26.15.2  (01-09-2013)
Required Filing Checks

  1. Title 31 inquiries must not be made during a Title 26 activity. BSA reports are not part of the Required Filing Checks for an examiner conducting an income tax examination. Thus, for example, an examiner conducting an income tax examination of a bank should not inquire as to the bank's Title 31 responsibilities or activities.

  2. The TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), is not a required filing check because it is a Title 31 requirement. However Form 8938, Statement of Specified Foreign Financial Assets, is a required filing check. As Form 8938 contains some of the same information as the FBAR, a failure to correctly complete Form 8938 may indicate a possible FBAR violation. See IRM 4.26.15.6.3, FBAR Violations Discovered in a Title 26 Case, below.

  3. Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, is part of the Required Filing Checks for an examiner conducting an income tax examination. See IRM 4.26.15.6.1, Form 8300 Violations Discovered in a Title 26 Case, below.

4.26.15.3  (01-09-2013)
Contacts with BSA Group Manager

  1. The local BSA group manager is the resource person for questions about BSA program policies and procedures.

  2. A Title 31 matter discovered during an income tax examination cannot be disclosed, even to the local BSA group manager, until a related statute determination has been made. See IRM 4.26.14.2.2 and subsection 4.26.15.6.2, below.

4.26.15.4  (01-09-2013)
WebCBRS Use in Title 26 Examinations

  1. WebCBRS information is useful in identifying cash activity that may not be accurately reported on the income tax return. In addition, it may lead the examiner to discover sources of unreported income, often derived from criminal activity. WebCBRS information is a "window" on the underground economy, with invaluable information not obtainable elsewhere.

  2. Examiners should refer to the WebCBRS User's Guide for guidance in interpreting WebCBRS extracts. See IRM 4.26.4.

4.26.15.4.1  (01-09-2013)
Access to Suspicious Activity Reports (SARs) on WebCBRS for Title 26 Civil Tax Purposes

  1. Access to BSA information through WebCBRS for tax purposes is governed by the Memorandum of Understanding (MOU) between the Financial Crimes Enforcement Network (FinCEN) and IRS dated September 24, 2010. See IRM 4.26.14, Disclosure, Exhibit 4.26.14-2.

  2. The MOU allows compliance employees electronic access to SAR information or the ability to receive SAR data when authorized by their operating division and business unit leaders.

  3. SAR information requests are limited to active examination and collection cases and case-building activities.

  4. Training on SAR information access and security is mandatory prior to any authorized access. For a full discussion of SAR access and security, see IRM 4.26.14. See also IRM 4.26.15.5.3, Examination of CI Referrals, below.

  5. Access and use of WebCBRS data is subject to minimum managerial review of audit trails to ensure appropriate use of WebCBRS data in relation to assigned cases.

    1. Reviews will be conducted on an annual basis and may be conducted in conjunction with annual workload reviews.

    2. A 30-day period will be selected from the prior 12 months of WebCBRS activity.

    3. Queries will be compared against open inventory for the same 30-day period or will be validated through other business controls (e.g. gatekeeper procedures) to ensure queries were related to assigned cases.

    4. A required second-level review would normally be conducted during an operational review.

4.26.15.5  (01-09-2013)
Examination of Information Reports from the BSA Program

  1. A by-product of the BSA program is that information about the financial transactions of businesses and individuals obtained during the course of a BSA examination may have material Title 26 compliance potential.

  2. The BSA examination program generates leads from sources such as:

    • BSA and Form 8300 examinations

    • Criminal Investigation referrals

    • The Enterprise Computing Center - Detroit.

  3. These information leads are forwarded to the field for possible income tax examinations on Form 5346, Examination Information Report or Form 3949, Criminal Investigation Information Item.

  4. The BSA examiner must not be assigned to the income tax examination.

4.26.15.5.1  (01-09-2013)
Project Codes

  1. Income tax examinations resulting from the BSA program are assigned the following project codes:

    • 432 — leads from the Form 8300 program

    • 441 — leads from the Title 31 program

  2. If fraud is discovered as part of an income tax examination and the case is updated to status 17, the project code should be changed to reflect the fraud issue:

    • From 432 to 146 - Form 8300 fraud

    • From 441 to 147 - Title 31 fraud

  3. The examiner should ensure that multiple years and any related return pick-ups also reflect the appropriate BSA project codes.

4.26.15.5.2  (01-09-2013)
General Audit Techniques

  1. If, in the course of a BSA examination, the examiner identifies individuals and/or businesses conducting questionable transactions in currency and/or monetary instruments that indicate possible tax violations, a referral for a tax examination may be appropriate. No related statute determination is necessary to transmit Title 31 information for Title 26 action.

  2. An income tax examination based on a referral from a BSA examination is conducted in accordance with established procedures for income tax examinations.

4.26.15.5.3  (01-09-2013)
Examination of CI Referrals

  1. A referral received by a compliance function from Criminal Investigation (CI) may be derived from information filed by financial institutions on SARs. These reports are confidential and the information must be protected from unauthorized disclosure.

  2. Because disclosure of SAR information is restricted by Section 5318(g) of Title 31, the examiner must not:

    • Disclose that a SAR report has been filed,

    • Propose an adjustment based solely on an amount listed on a Criminal Investigation Information Item (Form 3949),

    • Disclose a source or possible source of the information,

    • Conduct the examination in a manner in which the taxpayer could reasonably conclude any of the above, or

    • Issue a summons for specific SAR information.

  3. If during the course of an examination, a request is received to identify the source of and/or the information that caused the examination to begin, the examiner should not reveal SAR information or the fact that a SAR was filed. The suggested response is "I cannot disclose that information. The authority to withhold that information is in Internal Revenue Code Section 6103(e)(7)."

4.26.15.6  (01-09-2013)
Uncovering a BSA Violation in a Title 26 case

  1. A potential BSA or Form 8300 violation may be discovered during the course of conducting an income tax compliance activity.

  2. The examiner may not pursue or develop a BSA violation under the guise of a Title 26 compliance activity.

  3. For guidance on protecting return information from a prohibited disclosure, see IRM 4.26.14.

4.26.15.6.1  (01-09-2013)
Form 8300 Violations Discovered in a Title 26 Case

  1. Form 8300 is a dual-purpose form. It satisfies filing requirements under both Title 26 (IRC 6050I) and Title 31 (31 CFR 1010.350).

  2. Form 8300 is part of the Title 26 Required Filing Checks.

  3. When Form 8300 violations are discovered or suspected in a Title 26 case, the Title 26 examiner may examine the taxpayer's Form 8300 compliance under Title 26 without violating Title 26 disclosure rules.

  4. However, BSA examiners have expertise in conducting Form 8300 examinations. The Title 26 examiner, with management concurrence, may refer the Form 8300 issues to BSA for a Form 8300 examination. A Form 5346,Examination Information Report, must be prepared and sent to BSA Workload Identification, Selection, Delivery, and Monitoring (WISDM) for consideration of a Form 8300 examination.

4.26.15.6.2  (01-09-2013)
BSA Violations (Other Than FBAR) Discovered in a Title 26 Case

  1. Title 31 is not part of the Title 26 Required Filing Checks.

  2. BSA compliance cannot be examined during a Title 26 examination unless a Related Statute Determination (RSD) has been made. See IRM 4.26.14.2.2.

  3. Title 26 tax examiners or revenue officers cannot refer discovered or suspected BSA violations unless an RSD has been made. See IRM 4.26.14.2.2.

  4. Special considerations apply to FBAR violations.

4.26.15.6.3  (01-09-2013)
FBAR Violations Discovered in a Title 26 Case

  1. Foreign accounts are commonly discovered during a Title 26 tax case. Examiners can consult WebCBRS to verify if the taxpayer filed an FBAR.

  2. Foreign assets or accounts may also trigger a Form 8938 filing requirement. Form 8938 is a Title 26 requirement, not a BSA requirement. See the table in Exhibit 4.26.15-1 for a comparison of Form 8938 and FBAR filing requirements.

  3. BSA does not accept referrals for FBAR examinations. Each operating division is responsible for examining its own FBAR cases. The case examiner who discovers the suspected FBAR violation has the greatest knowledge of the facts of the case and is expected to address the FBAR issue.

  4. The Title 26 taxpayer cannot be examined for suspected FBAR violations unless an RSD has been made. The taxpayer should not be questioned regarding FBAR compliance until the RSD is made. See IRM 4.26.17.2.

  5. For assistance in working FBAR cases, see IRM 4.26.16 for FBAR law and 4.26.17 for FBAR procedures.

Exhibit 4.26.15-1 
Comparison of Form 8938 and FBAR Requirements

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