25.1.12 Bank Secrecy Act (BSA) Willfulness Referral Procedures

Manual Transmittal

July 28, 2017

Purpose

(1) This transmits revised IRM 25.1.12, Fraud Handbook, Bank Secrecy Act (BSA) Willfulness Referral Procedures.

Material Changes

(1) IRM 25.1.12.1 - Added Program Scope and Objectives.

(2) IRM 25.1.12.2(2) - Provided guidance to BSA examiners as to when they should discuss a case with their manager by emphasizing common indicators of fraud in BSA examinations.

(3) IRM 25.1.12.2(3) - Provided guidance that the common indicators listed in IRM 25.1.12.2(2) will not automatically lead to fraud.

(4) IRM 25.1.12.2(4) - Added guidance that the FTA will assist by recommending an action plan and providing suggestions for interviews.

(5) IRM 25.1.12.3(3) - Added guidance that the BSA examiner should consider a Lead to CI or a Lead to Exam when the FTA provides notification that willfulness can not be determined.

(6) IRM 25.1.12.3(4) - Added guidance that the FTA can assist the BSA examiner with consideration of when a Lead to CI and/or a Lead to Exam is appropriate and when appropriate, can assist the examiner in the preparation of such Lead.

(7) IRM 25.1.12.9(2) - Added scenarios as to when a Lead to CI should be considered.

(8) IRM 25.1.12.10(2) - Added scenarios as to when a Lead to Exam should be considered.

(9) Editorial changes made throughout.

Effect on Other Documents

This IRM supersedes IRM 25.1.12 dated December 31, 2013.

Audience

Criminal Investigation (CI) and Small Business/Self-Employed (SB/SE) - BSA and Fraud

Effective Date

(07-28-2017)

Adina Leach
Director, Business Support Office
Small Business/Self Employed

Program Scope and Objectives

  1. Purpose: This section of the Fraud Handbook provides guidance and procedures for Bank Secrecy Act (BSA) Title 31 cases, Form 8300, (Report of Cash Payments Over $10,000 Received in a Trade or Business) cases worked under Title 31, and addressing Reports of Foreign Bank and Financial Accounts (FBAR) violations.

  2. Audience: Criminal Investigation (CI) and Small Business/Self-Employed (SB/SE) - BSA and Fraud.

  3. Policy Owner: The Fraud Policy Office is responsible for the administration, procedures, and updates related to the National Fraud Program (NFP).

  4. Primary Stakeholders: Criminal Investigation employees, BSA employees, fraud technical advisors (FTAs), FTA managers, and examiners outside of BSA working on potential FBAR violations.

  5. Program Goals: The primary objective of the fraud program is to foster voluntary compliance through the recommendation of criminal prosecutions and/or civil penalties against taxpayers who evade the assessment and/or payment of taxes known to be due and owing.

Background

  1. BSA civil enforcement cases are referred to the Financial Crimes Enforcement Network (FinCEN) via Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, for consideration of appropriate enforcement action. Form 8300 and FBAR civil penalties are assessed by IRS, and are not referred to FinCEN.

  2. Form 2797, Referral Report of Potential Criminal Fraud Cases, is used to refer a BSA Title 31 case, and Form 8300 and FBAR criminal violations to CI for consideration.

  3. Revenue Agent FTAs will assist in the development of indicators of willfulness or intent, the determination of affirmative acts of willfulness or intent, and the preparation of Form 2797 (if needed). Also, the FTAs may assist BSA in the preparation of Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, for a civil enforcement referral to FinCEN.

Authority

  1. Exhibit 25.1.1-1 in IRM 25.1.1, Overview/Definitions, provides a listing of the elements necessary for the most common statutes under which criminal prosecution may be recommended by CI. Also see IRM 4.26.7.5, Criminal Penalties for Violation of Bank Secrecy Act.

  2. See IRM 4.26.7.2, Penalty Authority, for BSA penalty authority.

Roles and Responsibilities

  1. BSA examiners are responsible for identifying indications and/or affirmative acts of intentional or willful BSA Title 31, Form 8300, or FBAR violations and discussing such with his/her group manager.

  2. The BSA examiner, with the approval of his/her group manager, will then contact the local FTA for further guidance.

  3. Taxpayer Bill of Rights: In June of 2014 the IRS adopted the Taxpayer Bill of Rights (TBOR). Consider these rights during the course of carrying out your duties. For additional information refer to https://www.irs.gov/irm/part1/irm_01-002-010.html#d0e919 and Taxpayer Bill of Rights (TBOR) at https://www.irs.gov/taxpayer-bill-of-rights.

Program Management and Review

  1. Program Reports: On a monthly basis, a National Fraud Program analyst will generate and distribute to appropriate BSA management the BSA fraud program results from data extracted from the Fraud Information Tracking System (FITS).

  2. Program Effectiveness: Program goals are measured by the type of cases placed into fraud development, type of cases referred to CI, type of cases accepted by CI, and type of cases declined by CI.

Program Controls

  1. FTAs are required to follow-up with BSA examiners on cases placed into fraud development every 60 calendar days.

  2. FTAs are required to monitor accepted criminal referrals each quarter to ensure that CI and compliance are holding productive quarterly meetings as required under IRM 25.1.4.3.3, Required Communications.

Acronyms

  1. The table lists commonly used acronyms and their definitions.

    Acronym Definition
    BSA Bank Secrecy Act
    CBRS Currency and Banking Retrieval System
    CI Criminal Investigation
    CTR Currency Transaction Report
    FBAR Report of Foreign Bank and Financial Accounts
    FCQ FinCEN Query
    FinCEN Financial Crimes Enforcement Network
    FIRM Fraudulent Intent Referral Memorandum
    FITS Fraud Inventory Tracking System
    FTA Fraud Technical Advisor
    IDRS Information Data Retrieval System
    IRC Internal Revenue Code
    NFP National Fraud Program
    SAC Special Agent in Charge
    SAR Suspicious Activity Report
    TBOR Taxpayer Bill of Rights
    WISDM Workload Identification, Selection, Delivery and Monitoring

General Procedures for Referral of Violations

  1. If indications and/or affirmative acts of intentional or willful BSA Title 31, Form 8300, or FBAR violations are discovered, the examiner will discuss the potential violations with the compliance group manager. The examiner, with the approval of the compliance group manager, will contact the local FTA for guidance. If the examiner is considering only a civil referral to FinCEN, the involvement of the FTA is at the discretion of the examiner and compliance group manager.

  2. BSA examiners should talk to their manager when they encounter any of the following common indicators of fraud specific to BSA examinations:

    1. A money service business had violations during a previous visit and now has current violations;

    2. A money service business files most CTRs but does not file on certain customers;

    3. A money service business does not file any required forms, but admits they know the requirements to file;

    4. A money service business has unusual patterns of incoming or outgoing funds for itself or a customer;

    5. A money service business files incomplete and/or false CTRs or other required documentation, and

    6. The cash flow analysis does not reconcile and the owner has no explanation.

  3. It is important to remember that these are potential indicators of intent and will not automatically lead to fraud.

  4. The FTA will assist by recommending an action plan and provide suggestions for interviews which will further develop the case to determine if there are firm indications of fraud.

  5. If the decision to involve the FTA is made, the examiner will complete Form 13639, Fraudulent Intent Referral Memorandum (FIRM). Form 13639 documents the involvement of the FTA, the plan for developing the case with respect to the willfulness issue, and the referral recommendations of the FTA.

  6. The examiner documents indications and/or affirmative acts of willfulness in item 4 of Form 13639. The FTA documents the referral recommendations by checking one of the boxes in item 7 of Form 13639 and lists the reason(s) for recommendations made in the Explanation section of the Form 13639.

  7. Civil enforcement referrals on Form 5104 are reviewed by the BSA program analyst and if approved, then submits to the Program manager who then forwards to the BSA FinCEN liaison to forward through Secure Messaging to FinCEN. See Exhibit 25.1.12-1, IRS Standards for Title 31 Referrals to FinCEN, for guidance regarding when a referral is appropriate.

Development of Willfulness

  1. If further examination is warranted to determine if a violation was willful:

    1. The FTA will prepare a plan of action in the Explanation section of Form 13639 and return a copy of Form 13639 to the examiner through the compliance group manager.

      Note:

      The Form 13639 must be forwarded electronically through Secure Messaging because of the personally identifiable information (taxpayer information) being sent.

    2. The examiner and the FTA will collaborate to carry out the examination plan of action.

    3. If affirmative acts (firm indications) of willfulness are discovered after further examination, the examiner will immediately contact the FTA for guidance. Under no circumstances should the examiner contact CI.

  2. Upon completing the plan of action for further examination to determine whether a violation was willful, the examiner, compliance group manager and FTA will discuss the results and reach a decision regarding a criminal referral. The FTA will memorialize that decision on the Form 13639 . If a follow-up Form 13639 is completed, it should be stapled to the initial Form 13639. The FTA will indicate in item 7 of Form 13639 (original or follow-up) the final referral recommendation; either firm indications of willfulness and criminal criteria are present and preparation of Form 2797 is recommended; or criminal investigation is not appropriate. The FTA will provide, in the Explanation section, a detailed narrative of the firm indications of willfulness if a criminal referral is recommended, or the reason(s) why a criminal referral is not appropriate.

  3. If further examination is not warranted to determine whether a violation was willful, the FTA will indicate so in item 7 of Form 13639. The FTA will also provide a written explanation of the reason(s) why and include any recommendations with respect to civil penalties in the Explanation section of the form. The FTA will then notify the examiner and compliance group manager by electronically forwarding Form 13639 via Secure Messaging. When notification is received, the examiner should then consider a Lead to CI, see IRM 25.1.12.9 or a Lead to Exam, see IRM 25.1.12.10, when appropriate and then may proceed with the routine case procedures.

  4. The FTA can assist the examiner in considering if a Lead to CI or a Lead to Exam is appropriate, and if appropriate, can assist with the preparation of such.

Referral Recommendations - Criminal Referral is Not Recommended

  1. BSA Title 31 Case Procedures:

    1. If the examiner has uncovered the fact that a BSA form has not been filed as required, the examiner should request that the person electronically file the delinquent or amended BSA form with FinCEN and provide the examiner a copy of the electronic filing verification generated by the FinCEN BSA E-filing System. The filing can also be verified within 48 hours of filing on the FinCEN Portal.

  2. FBAR Procedures:

    1. If the examiner has uncovered the fact that an FBAR form has not been filed as required, the examiner should request that the person electronically file the delinquent or amended FBAR with FinCEN and provide the examiner with a copy of the electronic filing verification generated by the FinCEN BSA E-filing System. The filing can also be verified within 48 hours of filing on the FinCEN Portal.

    2. If civil penalties are considered, see IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR), and IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures.

  3. Form 8300 Procedures:

    1. With compliance group manager concurrence, the examiner should secure delinquent Form 8300 returns. However, if the examiner is considering whether the violation was due to intentional disregard or is considering referring the case to CI, delinquent Form 8300 returns should not be requested before consulting with the compliance group manager, and determining that a criminal referral is not warranted (see IRM 4.26.11.4.5.1, Delinquent Form 8300 Procedures ).

    2. If civil penalties are considered, see IRM 20.1.7, Penalty Handbook, Information Return Penalties, IRM 4.26.7.3, Civil Penalties, IRM 4.26.11.4.6, Penalties Asserted on IRC Section 6050I Violations, and IRM 4.26.11.5.4, Penalty Case File.

  4. See IRM 25.1.12.9, BSA Leads to CI, for procedures to follow when evidence of the violations do not meet the criminal/local criteria requirements for a referral by the examiner to CI.

Referral Recommendations - Criminal Referral is Recommended

  1. If firm indications of willful BSA, FBAR, or Form 8300 violations exist and criminal criteria (criteria used by CI for case acceptance) are met:

    1. The FTA will:

      i. Recommend preparation of Form 2797 by the examiner by annotating item 7 of Form 13639;

      ii. Upon receipt of Form 2797, signed by the compliance group manager, indicate in the Explanation section of Form 13639 the firm indications of willfulness that exist and that criminal criteria is met; and

      iii. Return a copy of Form 13639, via Secure Messaging, to the examiner through the compliance group manager.

    2. The examiner will suspend all civil examination activity and retain the civil file for subsequent action, upon notice from the FTA.

    3. The compliance group manager will record the suspense on the BSA database by entering the date Form 2797 was referred to CI.

    4. The sole responsibility for protecting the statute rests with the examiner and compliance group manager. A meeting of the examiner, compliance group manager and CI will be held to determine whether the statute of limitations should be allowed to expire.

  2. See IRM 4.26.17.5.4, FBAR Title 31 Criminal Referrals, for additional procedures pertaining to FBAR cases.

Preparation and Processing of Form 2797

  1. The following procedures apply only to Title 31 cases. See IRM 4.26.8.7.4, Preparing and Processing Form 2797, for additional guidance when preparing Form 2797 for a BSA violation. Most Form 8300 examinations are conducted under Title 26. See IRM 4.26.11, BSA Examiner Responsibilities for Form 8300/6050I Examinations, for additional guidance. The preparation and processing of Form 2797 for Title 26 examinations is prescribed in IRM 25.1.3.2, Preparation of Form 2797.

  2. The examiner is required to use the current version of Form 2797 located on the Forms Repository. The web address of the Forms Repository is http://publish.no.irs.gov/catlg.html.

  3. When preparing Form 2797 for a BSA violation, the examiner will follow the general instructions associated with the form (Page 5) and the following specific instructions:

    • Name and Address of Filer, TIN, and Personal Data (Item 1, Page 1) - Information must come from a Title 31 source (compliance examination, Web-Currency and Banking Retrieval System (CBRS), FinCEN Query (FCQ), etc.). Internal IRS data sources, such as Information Data Retrieval System (IDRS), must not be used to ascertain this information, unless a related statute determination was made. For BSA forms, see IRM 4.26.14.2.3, Related Statute Determination Factors.

      Note:

      "Filer" refers to the person required to file a report regardless of whether the report was filed.

    • Basis for the Suspected Fraud (Item 2, Page 1) - Checkbox 2i, Other should be marked and the text box used to identify the Title 31 issue (for example, structuring, FBAR or Currency Transaction Report (CTR) reporting violation). Checkboxes 2j and 2k may also apply. Checkboxes 2a through 2h, do not pertain to Title 31.

    • Administrative Information - (Items 4 -- 6, Page 2):

      Item 4b - CI Source Code selected will be "SE/SE-Other" .

      Item 6 - Source of Initiator. Enter the 12-digit AIMS Assignee Code. The Codes are located on the SB/SE - AIMS website under PBC 217 for BSA. A link to the site can also be found in the Form 2797 instructions for Item 6. Also, enter the Area (always "BSA" ), Territory name (for example: "Central North" ), and group number in the boxes provided.

    • Description of Affirmative Acts (Narrative, Page 3) - Description should not include any Title 26-related information, including assumptions, unless a related statute determination was made.

    • Describe Summonses Served (if any) - Title 26 summonses must not be mentioned, unless a related statute determination was made.

    • List all Investigative Sources Checked (IDRS, Web-CBRS, FCQ, Credit Bureau, Accurint, Public Records, etc.) - IDRS must not be accessed or mentioned, and information from the other sources (Web-CBRS, FCQ, Credit Bureau, etc.) should not be listed in this section if that information is taken from a Title 26 case file, except when a related statute determination was made.

    • Defense Given by Filer or Representative - Explanation provided only with respect to the Title 31 examination.

    • Comment on prior/subsequent year returns, if this is a single year referral - Comment should be limited to Title 31 Reports.

    • Description of Records - Limit description to records identifying only Title 31 transactions (for example, cash receipts/cash disbursements journal, cashed checks), unless a related statute determination was made.

    • Describe Basis or Method Used for the Computation of the Fraud Adjustments - Description should be limited to the Title 31 penalty adjustments.

    • Non-Taxable Sources of Income and Cash on Hand - Include only if relevant to the Title 31 penalty adjustments. Do not include any information taken from a Title 26 case file, unless a related statute determination was made.

  4. See IRM 25.1.3.2(3) to (6), Preparation of Form 2797 - Referral Report of Potential Criminal Fraud Cases, for detailed instructions concerning the processing of Form 2797 .

Joint Title 26 - Title 31 Criminal Referral Disclosure Concern

  1. The procedures prescribed below do not apply to Form 8300 examinations conducted under Title 26.

  2. A memorandum of understanding (MOU) between IRS and FinCEN provides:

    "Matters Referred to IRS CI – If a matter involving a BSA violation is to be referred to CI, the IRS will provide FinCEN with a copy of the portion of the referral package to CI that is related to BSA violations or deficiencies at the same time the IRS provides the referral package to CI. Until CI either rejects the referral or clears the BSA matter for civil enforcement consideration, FinCEN agrees not to share the referral package and the information contained therein with a third party or to otherwise take any action with respect to such information without first obtaining written approval from CI."

    In order to meet this requirement, the National Fraud Program (NFP) SB/SE BSA Liaison will electronically transmit via Secure Messaging, a copy of the Form 2797 to the BSA senior program analyst having the responsibility for reviewing the Form 2797 for potential disclosure violations. The BSA program analyst will ensure the Form 2797 does not contain any "tax return information " prior to forwarding to FinCEN.

  3. If return information is included in the referral, access to and use of IRC 6103 protected information, such as IDRS data, for non-tax purposes is prohibited. Its use may constitute a violation of IRC 7213 and/or IRC 7213A (unauthorized disclosure and/or unauthorized access). See IRM 4.26.14, Disclosure, for further information on disclosure restrictions and BSA, except when a related statute determination has been made. Information obtained from Title 26 examinations cannot be included in Title 31 criminal referrals (Form 2797), if a related statute determination has not been made. A disclosure violation may also occur even when a related statute determination has been made, if the person to whom the disclosure is made does not have a "need to know" the tax information included in the referral. Thus, Title 31 criminal referrals will not include Title 26 return information except when a related statute determination is made. A copy of the related statute determination memorandum must be attached to the Form 2797.

Parallel Civil and Criminal Leads

  1. Prior to the disposition conference, it may be helpful for the compliance group manager to contact the SB/SE BSA Liaison (hereafter referred to as BSA Liaison) and/or the CI FinCEN liaison for assistance in determining whether parallel civil and criminal action may be appropriate.

  2. During the disposition conference, if the case is accepted for criminal investigation, the CI and compliance participants should discuss the possibility of parallel civil and criminal actions. See Policy Statement 4-26 (formerly P-4-84), Criminal and Civil Aspects in Enforcement, under IRM 1.2.13.1.11. A civil money penalty may be imposed, notwithstanding the fact that a criminal penalty is imposed with respect to the same violation. Parallel referrals may be desirable when protecting the statute of limitations or for other reasons.

  3. If a case warrants parallel civil and criminal actions, it should be noted in the Form 5104 referral. Once a related statute determination has been made, the entire case becomes a Title 26 case, thereby allowing return information to be used.

  4. Before the civil referral is considered by FinCEN, the CI FinCEN liaison will review the referral for compatibility with CI's needs. FinCEN will not receive the referral for civil enforcement action until this review is completed.

BSA Leads to CI

  1. Evidence of violations that do not meet the criminal/local criteria requirements may be referred to CI by the examiner as an information item. Information items are forwarded by memorandum. See Exhibit 25.1.12-2, Sample Memorandum to Transmit Leads from BSA to CI.

  2. A BSA Lead Memorandum to CI should be considered, but not limited to, the following scenarios:

    1. When there are potential indications of money laundering, but it cannot be tied to an illegal act;

    2. When transactions may indicate terrorist financing activities based on amounts, individuals, and countries involved;

    3. When the BSA examiner identifies customer transactions that are suspicious, but cannot be fully developed through the BSA examination; or

    4. When a return preparer is identified cashing client refund checks.

  3. The memorandum is sent via Secure Messaging from the BSA group manager to the appropriate FTA group manager.

  4. The FTA group manager will, upon receipt, review and approve the memorandum, send a copy of that memorandum via Secure Messaging, to the Workload Identification, Selection, Delivery and Monitoring (WISDM) Title 31 supervisor and/or the WISDM National 8300 supervisor, as appropriate to: *SBSE BSA CI Notification; where it will then be forwarded to the correct BSA Coordinator, WISDM.

  5. The FTA group manager after approving, will forward the memorandum to the Special Agent in Charge (SAC) at the respective CI Field Office.

  6. Developed leads are assigned a source code reflecting SB/SE BSA as the source of the information.

BSA Leads to Exam

  1. Evidence of customers engaging in substantial check cashing, money order purchase/redemption, wire transmission, structuring, etc. should be captured on Form 5346, Examination Information Report.

  2. A BSA Lead to Exam should be considered, but not limited to, the following scenarios:

    1. When the transactions indicate there could be unreported income or employment tax issues;

    2. When cashing checks from businesses where this would not be a normal practice, such as doctors or attorneys;

    3. When cashing checks from businesses that have high labor expenses, such as in construction or landscaping;

    4. When there are numerous wire transfers out of the country that are below reporting requirements; or

    5. When there are structured transactions through wires or money orders that are below reporting requirements.

  3. It is crucial that copies of all supporting evidence (cashed checks - front and back, money orders, wire transmission receipts, etc.) are included.

  4. The examiner will prepare the Form 5346, retain a copy of each form for the case file, and forward the completed Form 5346 to the compliance group manager for approval.

  5. Upon approval, the compliance group manager will mail the forms for consideration of a Title 31 and/or Title 26 violation to the BSA coordinator at: http://sbseservicewide.web.irs.gov/Fraud/FraudCont/526.aspx .

IRS Standards for Title 31 Referrals to FinCEN

To provide consistency in referrals to FinCEN, the following guidelines are provided to assist in taking appropriate actions.

For purposes of referring matters to FinCEN a "significant BSA violation or deficiency" includes:

  • A systemic or pervasive BSA compliance program deficiency;

  • Systemic or pervasive BSA reporting or recordkeeping violations;

  • A situation where an organization fails to respond to regulatory actions concerning BSA compliance program deficiencies; or

  • Systemic or pervasive recordkeeping or reporting deficiency, even when such deficiency or violation is dissimilar to those previously identified in Letter 1112 or other IRS/FinCEN correspondence.

A significant BSA violation or deficiency can also include a non-technical, one-time BSA violation, which evidences willful or reckless disregard for the requirements of the BSA; or that creates a substantial risk of money laundering or the financing of terrorism within the institution.

Conversely, technical, minor, infrequent, isolated, and non-substantive violations will generally not be referred to FinCEN.

First-time violations may be appropriate for referral depending on their nature (e.g. severity, number, and circumstance, etc.). Normally, isolated first incidences of noncompliance should not be referred. If an entity is cited subsequently for the same types of violations, the examiner should closely scrutinize the continued lack of compliance in determining whether a referral is appropriate.

Any violation committed in furtherance of a criminal activity warrants referral regardless of the number, severity, or that it was a first violation.

If during a BSA examination, it is discovered that a bank or other financial institution, not covered under IRS BSA examination authority, may have violated the BSA, a memorandum to FinCEN should be prepared outlining the circumstances. The memorandum must be routed through the territory manager and forwarded to the BSA Liaison for forwarding to FinCEN’s Office of Compliance and Enforcement.

General Civil Penalty Referral Guidelines

Many BSA civil penalties require that a violation be "willful" for penalty consideration. Willfulness requires an intentional violation of a known legal duty. In many situations, there will be no direct evidence to establish willfulness; therefore, examiners will often need to establish willfulness through circumstantial evidence. An examiner should consider the following factors in determining whether willfulness is supported and whether violations should be referred formally to FinCEN:

  • Pattern of reckless disregard towards, or systemic breakdown in, compliance with the anti-money laundering program requirements of the BSA;

  • Evidence that the violation has, or may have, facilitated or concealed illegal activity by the institution, its employees, its customers, and/or others;

  • Evidence that suggests the violation was flagrant, demonstrated bad faith, or was committed with intentional disregard for the law or the consequences to the institution;

  • Frequency or reoccurrence of violations;

  • Institution continues to commit violations after becoming aware of them and/or made no efforts to correct the deficiencies, which led to the violations;

  • Failure to cooperate with the Service to correct the violation;

  • Evidence of concealment of the violation;

  • Evidence that financial institution insiders were participants in the currency transaction, or that their associates, directly or indirectly, benefited as a result of the violation;

  • History of prior violations and/or poor compliance;

  • Previous written criticism of the institution for similar violations;

  • Absence of/severe inadequacies in/or failure to adhere to the requirements of internal control policies and procedures of the compliance program;

  • Issuance of a previous warning letter or other previous written notification of a violation to the financial institution;

  • The practice of preparing but not filing CTRs or Suspicious Activity Reports (SARs);

  • Repeated late filings of CTRs or SARs;

  • Filing CTRs with incomplete or false information;

  • Filing SARs with incomplete or false information;

  • Failures to verify identification;

  • Failure to keep records;

  • False recordkeeping entries; and/or

  • Officers and employees of the financial institution making false statements, refusing to cooperate, and/or withholding records from the examiner.

The above listing is not all inclusive

Examples of situations that might also warrant a referral:

  • Failure to file FinCEN Form 112 , Currency Transaction Report, or FinCEN Form 111 , Suspicious Activity Report;

  • A significant number of reportable transactions that were not reported as a pattern or practice at a certain location, or as a pattern or practice for one or more specific customers or accounts;

  • A significant number of technical violations i.e., incomplete or inaccurate FinCEN Form 103 , Currency Transaction Report by Casinos, or FinCEN Form 104 , Currency Transaction Report. For example, a referral may be warranted if a sampling of CTRs filed reveals error rates that exceed a certain percentage or a systemic breakdown;

  • Failure by a credit union/bank under IRS jurisdiction to maintain a centralized exempt customer list that exempts certain customer accounts from Title 31 reporting requirements;

  • Inclusion of ineligible entities on the exemption list by credit union/bank under IRS jurisdiction;

  • Lack of adequate internal controls or audit coverage, or inaccuracies in the financial institution’s training materials regarding Title 31, in combination with violations of Title 31 reporting and recordkeeping requirements; and

  • Continued violation of the financial recordkeeping and reporting regulations of Title 31 despite prior notification of violations.

Systemic or Pervasive Violations Customarily Warranting Civil Referral

  • Pattern of reckless disregard towards, or systemic breakdown in, compliance with the anti-money laundering program requirements of the BSA;

  • Repeated failures to file required CTRs or SARs;

  • Repeated failures to verify the identification of the transactor;

  • Repeated filing of incomplete CTRs lacking key information;

  • Flagrant indifference to or aiding in structured transactions to avoid reporting requirements by the financial institution; and/or

  • Suspected money laundering activity.

Sample Memorandum to Transmit Leads from BSA to CI

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