4.26.3 Examination Case Selection (ECS)

Manual Transmittal

March 01, 2019

Purpose

(1) This transmits revised IRM 4.26.3, Bank Secrecy Act, Examination Case Selection (ECS).

Material Changes

(1) This IRM was updated to include required information about the program’s system of internal controls.

(2) The following table identifies changes to this IRM relating to IPU 17U1312 issued on September 17, 2017.

IRM Section Description
4.26.3.1 Renamed section from Overview to Program Scope and Objective to address Internal Controls and Fairness in Case Selection.
4.26.3.1.1 Background - new subsection.
4.26.3.1.2 Authority - new subsection.
4.26.3.1.3 Responsibilities - new subsection.
4.26.3.1.4 Program Reports - new subsection.
4.26.3.1.5 Acronyms - new subsection.
4.26.3.2.3 4.26.3.2.2 - Restructured section by moving Title 31 Case Selection responsibilities to new 4.26.3.2.3. Renamed section to Title 31 Case Selection and moved case selection content from 4.26.3.2.2. Added content to emphasize the need to document all actions taken as part of the Coordinator’s responsibilities during Title 31 case selection.
4.26.3..2.3.1 Moved Title 31 Section Case Factors from 4.26.3.2.3 to new subsection.
4.26.3.2.4 New section Title 31 Non-Selection. Content of new section to emphasize the need to document all actions taken as part of the coordinator’s responsibilities during Title 31 non-selection.
4.26.3.2.5 New section Title 31 Survey. Content of new section to emphasize the need to document all actions taken as part of the coordinator’s responsibilities during Title 31 survey.
4.26.3.2.6 New subsection - New Inventory Orders.
4.26.3.2.7 Title 31 Database Access and Use moved to 4.26.3.2.7. Content of new section discusses the process for determining new inventory orders for BSA field groups. 4.26.3.2.6 Title 31 Database Access and Use moved from 4.26.3.2.4. This subsection renumbered to 4.26.3.2.7.
4.26.3.2.8 4.26.3.2.7 - Title 31 Case Building and Case File moved from 4.26.3.2.5. This subsection renumbered to 4.26.3.2.8.
4.26.3.2.9 New subsection - Assignment and Delivery of Cases. 4.26.3.2.9 - Headquarters Coordinator moved to 4.26.3.2.11. Content of new section discusses the delivery of inventory to the Field.
4.26.3.2.10 4.26.3.2.8 - Tax Examiner moved from 4.26.3.2.6. This subsection renumbered to 4.26.3.2.10.
4.26.3.2.11 4.26.3.2.9 - Headquarters Coordinator moved from IRM 4.26.3.2.7. This subsection renamed to Centralized Exam Coordinator and renumbered to 4.26.3.2.11.
4.26.3.2.12 4.26.3.2.10 - Casino Coordinator moved from 4.26.3.2.8. This subsection renumbered to 4.26.3.2.12.
4.26.3.2.13 New subsection Compliance Initiative Coordinator. This section emphasizes the responsibilities of the Compliance Initiative Coordinator.
4.26.3.2.14 4.26.3.2.11 - Fed-State BSA MOU Coordinator moved from 4.26.3.2.9. This subsection renamed to State BSA MOU Coordinator and renumbered to 4.24.6.3.2.14.
4.26.3.2.15 New subsection FinCEN-BSA MOU Coordinator. Content of new subsection to emphasize coordinator responsibilities for FinCEN-BSA MOU.
4.26.3.2.16 4.26.3.2.12 - New Entity/Entity Update Coordinator moved from 4.26.3.2.10. This subsection renumbered to 4.26.3.2.16.
4.26.3.3.3. 4.26.3.3.2 - Restructured section by moving Form 8300 Case Selection responsibilities to new 4.26.3.3.3. Renamed section to Form 8300 Case Selection and moved case selection content from 4.26.3.3.2. Added content to emphasize the need to document all actions taken as part of the coordinator’s responsibilities during Form 8300 case selection.
4.26.3.3.3.1 Moved Form 8300 Case Selection Factors from 4.26.3.3.3 to new subsection.
4.26.3.3.4 New section Form 8300 Non-Selection. Content of new section to emphasize the need to document all actions taken as part of the coordinator’s responsibilities during Form 8300 non-selection.
4.26.3.3.5 Form 8300 Case Building and Case File moved from 4.26.3.3.4.
4.26.3.6 New section Review of Performance.
4.26.3.7 Liaison moved from 4.26.3.6.
4.26.3.8 New section BSA ECS FCQ Audit Reports. This new section provides the process for providing audit trail reports to SB/SE Managers.

(3) Text is revised and reformatted to reflect updated procedures.

(4) Editorial changes have been made throughout this IRM to add clarity and consistency.

Effect on Other Documents

This supersedes IRM 4.26.3 dated September 19, 2016. IPU 17U1312 issued from September 7, 2017, through September 7, 2019, is incorporated in this IRM.

Audience

Employees of the Bank Secrecy Act Program in the Small Business/Self Employed (SB/SE) division and can be referenced by all field compliance personnel.

Effective Date

(03-01-2019)

Richard L. Tierney
Director, Exam Case Selection
Small Business/Self Employed

Program Scope and Objective

  1. Purpose. This section provides guidance for the Bank Secrecy Act (BSA) Exam Case Selection (ECS) function in identifying, selecting, classifying and delivering Title 31 and Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, (Form 8300) inventory to BSA examination groups.

  2. Objective. Ensure BSA examinations are initiated based on indicators of non-compliance identified in the Internal Revenue Manual (IRM). In addition, ensure a review of the decisions to survey a case (i.e., not initiate an examination) are based upon factors outlined in the IRM and approved by an appropriate level of management.

  3. Fairness in Case Selection. Inventory is selected based on indicators of non-compliance to ensure "fairness" in the inventory selection processes. There are three aspects which apply to fairness in case selection.

    1. To ensure fairness to the taxpaying public, the Examination Work Plans provide a balanced approach for BSA case delivery and allocation of resources to address areas of BSA non-compliance by taking into account factors such as geographic locations, Money Service Business (MSB) services and industry types.

    2. To ensure an equitable process for all taxpayers, case selection decisions are made utilizing available experience and information indicating the highest likelihood of non-compliance. No one individual controls the examination selection decision making process. Involvement is limited to only those employees whose duties require them to be included.

    3. To ensure fairness to each taxpayer whose case is selected, case selection decisions are based on the information obtained on the taxpayer using a combination of tools and the underlying BSA law. Managerial as well as quality reviews of selection decisions occur during each phase of the selection and assignment.

  4. Audience. These procedures apply to BSA ECS employees who are responsible for the identification, selection and delivery of inventory in the Bank Secrecy Act Program.

  5. Policy Owner. BSA Exam Case Selection is under the Director of SB/SE Headquarters Examination.

  6. Program Owner. Assistant Director, Exam Case Selection is responsible for BSA Exam Case Selection, for the selection and delivery of inventory to the BSA field exam.

Background

  1. BSA ECS is responsible for identifying and delivering cases to BSA field exam. Those cases are acquired from a variety of sources. This IRM section lists the types of Non-Bank Financial Institutions (NBFIs). Refer to IRM 4.26.3.2.1 under IRS jurisdiction subject to the BSA under Title 31 Chapter X and Non-Financial Trades and Businesses (NFTBs) subject to Form 8300 reporting requirements under Title 26 IRC 6050I and Title 31 USC 5331.

Authority

  1. Authority for the IRS to conduct BSA examinations includes the following sources:

    1. IRM 4.26.1.2, Authority for Bank Secrecy Act.

    2. IRM 4.26.1-2, Interim Guidance Previously Delegated Through Directive 15-41.

    3. IRM 4.26.1-4,Form 8300 Title 31 Delegation to IRS.

Responsibilities

  1. Assistant Director, Exam Case Selection is the executive responsible for the oversight and program coordination of workload selection and delivery of inventory for SB/SE BSA Examination.

  2. BSA Program Manager, Exam Case Selection is the manager responsible for the oversight of selection of cases and delivery of inventory for SB/SE BSA Field.

  3. BSA Group Manager, Exam Case Selection is the manager responsible for the selection of cases and delivery of inventory within the SB/SE BSA Territories.

Program Reports

  1. The following reports are used to monitor the identification, selection and delivery of inventory.

    1. Weekly Predictive Inventory Report

    2. Bi-Monthly Form 8300 Status Report

    3. Monthly BSA Program Wide Report

Acronyms

  1. The following is a list of acronyms used throughout this IRM:

    Acronym Definition
    AML Anti-Money Laundering
    BSA Bank Secrecy Act
    CDW Compliance Data Warehouse
    CI Criminal Investigation
    CTR Currency Transaction Report
    ECS Exam Case Selection
    ERCS Examination Return Control System
    FCQ FinCEN Query
    FIFO First In First Out
    FinCEN Financial Crimes Enforcement Network
    HIDTA High Intensity Drug Trafficking Area
    HIFCA High Intensity Financial Crime Area
    HQ Headquarters
    IDRS Integrated Data Retrieval System
    ITG Indian Tribal Government
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    MSB Money Service Business
    NBFI Non-Bank Financial Institution
    NFTB Non-Financial Trades and Businesses
    POD Post of Duty
    SAR Suspicious Activity Report
    SB/SE Small Business Self-Employed
    T-31 Title 31

Title 31 Program

  1. ECS is responsible for delivering inventory of NBFIs subject to the BSA and regulations at 31 CFR Chapter X for which IRS has been delegated authority to examine.

  2. This subsection describes the functions and responsibilities that comprise the ECS Title 31 program.

Identification of BSA Entities

  1. ECS identifies entities for which IRS has BSA examination authority. 31 CFR 1010.81(b)(8), Enforcement, delegates to the IRS examination authority to ensure BSA compliance over all financial institutions except brokers or dealers in securities, mutual funds, futures commission merchants, introducing brokers in commodities, commodity trading, or financial institutions not currently examined by Federal bank supervisory agencies for soundness and safety. Most IRS delegated entities are commonly referred to as NBFIs. NBFIs include:

    1. MSBs subject to certain transaction thresholds.

    2. Casinos and card clubs (including Indian tribal casinos) subject to the Anti-Money Laundering (AML) program requirements of the BSA.

    3. Credit unions that are state chartered and non-Federally insured.

    4. Insurance companies subject to the AML program requirements of the BSA.

    5. Dealers in precious metals, precious stones, or jewels subject to the AML program requirements of the BSA.

      Note:

      This list will grow as other future classes of BSA entities are defined and jurisdiction is delegated to IRS by the Financial Crimes Enforcement Network (FinCEN).

  2. MSBs, subject to certain threshold amounts under IRS jurisdiction include:

    1. Dealers in Foreign Exchange.

    2. Check Cashers.

    3. Issuers or Sellers of Traveler's Checks or Money Orders.

    4. Providers of Prepaid Access.

    5. Sellers of Prepaid Access.

    6. Money Transmitters.

  3. The following sources may be used to identify NBFIs:

    1. External databases

    2. Field referrals (referrals may require a related statute determination)

    3. BSA examiner referrals resulting from physical observation or review of competitor listings

    4. Telephone books

    5. FinCEN Query (FCQ)

    6. Neighborhood publications

    7. Trade or business associations

    8. Office of Research and Analysis

    9. BSA Compliance Department, Detroit special reports

    10. Internet research

    11. State and local licensing and/or regulatory agencies

    12. Criminal Investigation (CI) referrals

    13. MSB agent lists received from examiners and FinCEN

    14. Referrals from FinCEN

    15. Referrals from Federal, state, or local law enforcement agencies

  4. The Integrated Data Retrieval System (IDRS) or other tax-based systems may not be used to research information for T-31 BSA compliance.

  5. The T-31 NBFI Database is updated when a new NBFI entity is identified.

  6. FCQ is an effective tool in assisting with the enforcement of BSA compliance. For more information on FCQ and the ECS Coordinator’s use of FCQ, refer to IRM 4.26.4, Bank Secrecy Act - FinCEN Query (FCQ).

Notification After Identification
  1. Notification of the BSA reporting and recordkeeping requirements for MSBs, casinos and credit unions is accomplished by issuance of Letter 1052, Bank Secrecy Act Requirements Notification Letter, (Letter 1052).

  2. The requirement to furnish a copy of the current 31 CFR Chapter X to NBFIs that are not MSBs, e.g., casinos and credit unions, continues until FinCEN publishes further industry-specific guidance.

  3. The date the Letter 1052 was issued must be documented in the case file and on the T-31 NBFI Database.

  4. A copy of Letter 1052 must be retained in the case file.

Title 31 Program Coordination

  1. The Title 31 Coordinator’s responsibilities include:

    1. Analyzing current inventory levels of field groups to ensure the steady flow and adequate assignment of cases.

    2. Discuss inventory needs with Field Group Managers and take the necessary follow up action(s) to establish order(s) in line with Annual Work Plans.

    3. Completing orders within the recommended turnaround time of 30 days for orders of 20 cases or less and up to 60 days for orders of more than 20 cases.

    4. Delivering the orders on First in First Out (FIFO) basis.

    5. Delivering priority cases, such as those needed for declarations, training, geographic targeting orders, etc.

    6. Listing Post of Duty (POD) in priority order when requesting a group order with multiple PODs.

    7. Use preliminary case selection methodology referenced in IRM 4.26.3.2.3. Assign selected entities to the tax examiner to perform their tasks outlined in IRM 4.26.3.2.10.

    8. Communicating with the tax examiner on priorities, number of cases needed for an order and resolve any questions.

    9. Sending the list of selected cases to CI for clearance before assigning them to the group; requesting a two-week response time from CI.

    10. Grading and classifying selected cases using post-case selection methodology referenced in IRM 4.26.3.2.3. Grading and classification sheets are available on the BSA Policy SharePoint site.

    11. Obtaining BSA ECS Group Manager concurrence for the selected entities and providing BSA field groups with the administrative case files. The selected administrative files are sent to the BSA group, accompanied by Form 3210, Document Transmittal, (Form 3210).

    12. Maintaining BSA inventory on the T-31 NBFI Database.

    13. Maintaining physical control of unassigned BSA inventory.

Title 31 Case Selection

  1. T-31 Coordinator preliminary and post case selection responsibilities include:

    1. Selecting entities for T-31 examinations using risk-based analysis to identify entities with the highest potential of noncompliance. See IRM 4.26.3.2.3.1, Title 31 Case Selection Factors, for selection factors.

    2. Selecting cases involving the insurance industry or dealers in precious metals, precious stones and jewels for Title 31 examinations, due to their AML program requirements before selecting them for Form 8300 examinations.

    3. Taking into consideration the priorities in the annual work plans, available resources, case grading guidelines, balanced coverage (geographic area and industry) and anticipated field inventory needs when selecting entities for examination.

  2. Preliminary case selection is performed using risk-based analysis to identify entities with the highest potential of non-compliance, using the factors outlined in IRM 4.26.3.2.3.1 . As part of the preliminary case selection steps the T-31 Coordinator will:

    1. Create a spreadsheet of cases initially selected from the T-31 NBFI Database for consideration for case-building, utilizing the factors in IRM 4.26.3.2.3.1 or utilize a spreadsheet generated from a workload initiative for management to review.

    2. Document the spreadsheet with the methodology used for selecting cases for case building.

    3. Place a copy of the selected cases spreadsheet on the BSA shared drive in the coordinator’s folder.

    4. Notify the manager the spreadsheet is ready for review.

  3. Post case selection is performed using risk-based analysis to identify entities with the highest potential of non-compliance, using the factors outlined in IRM 4.26.3.2.3.1. As part of the post case selection steps the T-31 Coordinator will:

    1. Review the entity information as stated in IRM 4.26.3.2.8(2), Title 31 Case Building and Case File.

    2. Document the reason(s) for selecting an entity for examination on the classification sheet.

  4. Refer to BSA Policy SharePoint site for more information about BSA ECS Coordinator T-31 Case Selection Procedures.

Title 31 Case Selection Factors
  1. Preliminary and post case selection responsibilities include identifying entities using a risk-based approach to identify the best next case. Factors used in both selection processes may include:

    1. Identified through referrals from CI, FinCEN, or other BSA examinations.

    2. Local geographic areas identified as High Intensity Drug Trafficking Areas (HIDTAs) and High Intensity Financial Crime Areas (HIFCAs).

    3. Compliance history.

    4. Unusual Currency Transaction Report (CTR) or Suspicious Activity Report (SAR) filings and non-filing patterns.

    5. Anomalies in bank CTRs/SARs filed on the entity, indicating unusual cash activity.

    6. Unregistered as an MSB but appears to be operating as an MSB.

    7. Entities that are MSBs but have not re-registered or renewed their registration.

    8. History of filing forms late and/or with errors.

    9. Appearance of facilitating structuring.

    10. Referred by Federal, state, or local enforcement agencies or regulatory agency.

Title 31 Non-Selection

  1. When the T-31 Coordinator reviews the completed case file and deems it low potential based on Title 31 selection factors in IRM 4.26.3.2.3.1, a non-select determination is made.

  2. The T-31 Coordinator will:

    1. Return the case to status 06 on the T-31 NBFI Database with the reason for non-select documented in the comment section.

    2. Document the reason for non-select on the activity record.

    3. Send non-select case files to the BSA ECS Group Manager monthly, at end of cycle.

  3. To ensure fairness in case selection, the BSA ECS Manager will review the decisions to non-select cases in accordance with IRM 4.26.3.6.

Title 31 Survey

  1. A survey is applicable when:

    1. Not an MSB.

    2. No longer in business.

    3. Duplicate of an existing case.

    4. Unlocatable.

    5. New owner for this location.

  2. When factors listed in IRM 4.26.3.2.5 (1) apply, the ECS Coordinator will survey the entity located on the T-31 NBFI Database as follows:

    1. When applicable, prepare a Survey Cover Sheet and document and initial the reason for the survey. Prepare a Survey Cover sheet and document the survey decision for each entity identified by the coordinator.

    2. Review all documentation provided by the tax examiner; notate on the Survey Cover Sheet or research material "Closed ECS Survey," reason for survey, initial and date.

    3. Disposal Code 20 Survey will be used.

    4. Send survey packets containing the information from "a " and "b" above by mail to the manager once a month at the end of cycle.

  3. To ensure fairness in case selection, the BSA ECS Manager will review the decisions to survey cases based in accordance with IRM 4.26.3.6.

New Inventory Orders

  1. BSA ECS Group Manager forwards the Predictive Inventory Report and the inventory needs of the groups to the coordinators.

  2. The T-31 Coordinator will analyze the report and discuss inventory needs with the Field Group Manager.

  3. The T-31 Coordinator will send an email to the BSA ECS Group Manager requesting an order be placed on the T-31 NBFI Database. If no order is needed, the coordinator will send an email to the BSA ECS Group Manager to this effect.

  4. The BSA ECS Manager will review and approve all order requests. Approved order requests are then assigned to the coordinator on the T-31 NBFI Database.

Title 31 Database Access and Use

  1. The T-31 NBFI Database serves as an inventory of entities that have been identified as NBFIs by IRS field functions, agent lists, outside data sources and internet research. The T-31 NBFI Database provides BSA staff with key information on prior examined entities, entities currently being examined and entities currently available for examination selection.

  2. BSA ECS T-31 Coordinators have direct access to the T-31 NBFI Database through an on-line 5081 application and link through Microsoft Access. T-31 Coordinators use the T-31 NBFI Database as their main source of field case selection.

Title 31 Case Building and Case File

  1. Case building is the process of researching and assembling entity information for BSA examiners to consider when conducting their examinations.

  2. Classification is the process of determining whether an entity should be selected for examination. After review of the entity information, the BSA ECS T-31 Coordinator will classify the case using the BSA Title 31 Case Classification Sheet, which is available on the BSA Policy SharePoint site.

  3. The BSA ECS T-31 Coordinator will assign the initial grade of case using the case grading guidelines, which is available on the BSA Policy SharePoint site.

  4. The T-31 case file will include the following items as part of the case building process:

    1. Form 9984, Examining Officer’s Activity Record, (Form 9984) or BSA ECS Case Building Check List containing dates of significant case building activity. See (5) below for listing of dates.

    2. Current FCQ and internet research -

      Reminder:

      Any confidential FCQ information, such as SAR data, must be protected in a sealed confidential envelope. Refer to IRM 4.26.14.6.2(8), SAR Disclosure by Government Officers and Employees, for detailed security procedures for safeguarding SAR information.

    3. Other information to confirm address and business type, e.g., information from Accurint.

    4. Copy of Letter 1052.

    5. Copy of prior Letter 1112, Title 31 Violation Notification Letter, (Letter 1112) if applicable.

    6. Case Closing Document.

    7. BSA Title 31 Case Grading Sheet. This optional form is available on the BSA Policy SharePoint site.

    8. BSA Title 31 Case Classification Sheet. This optional form is available on the BSA Policy SharePoint site.

  5. Dates listed on Form 9984 or BSA ECS T-31 Case Building Check List include:

    1. Case Selection.

    2. CI clearance request and approval.

    3. Letter 1052 issuance.

    4. FCQ and internet research.

    5. Entity contact verifying business is still operating, MSB services and ownership.

    6. Case classification and case grading.

    7. Forwarding case to the Field Group.

  6. Refer to BSA Policy SharePoint site for more information on ECS Case Building Procedures.

Assignment and Delivery of Cases

  1. T-31 cases are assigned by the T-31 coordinator and received in the group in status 09. The coordinator will follow the directions in the ECS User Guide when assigning cases to the groups. The ECS User Guide is available on the BSA Policy SharePoint site.

  2. When mailing cases, the following steps should be taken:

    1. Always use Form 3210.

    2. Double-package the cases placing an address label on both.

    3. Do not indicate on the outer packaging and/or address label that the package contains personally identifiable information (PII) or sensitive material.

    4. Track the package during delivery using the tracking number.

    5. Require the recipient acknowledges receipt of the package by signing and returning Form 3210.

Tax Examiner

  1. BSA ECS Tax Examiner duties include:

    1. Conducting research to validate entity information using FCQ, Accurint, Internet, etc.

    2. Contacting the entity by telephone to verify it is active, services provided and secure its correct name, address, owner, etc.

    3. Preparing Letter 1052 if needed.

    4. Printing prior Letter 1112 violations.

    5. Assembling the administrative file.

    6. Preparing a Survey Cover Sheet, where applicable, documenting the reason for the survey and attaching all relevant research.

    7. Working assigned orders on a FIFO basis unless directed by coordinator to work priority orders.

    8. Completing assigned orders timely and returning them to the coordinator in a manner, which supports the recommended turnaround time of 30 days for orders of 20 cases or less and up to 60 days for orders of more than 20 cases.

  2. Refer to BSA Policy SharePoint site for more information on ECS Case Building Procedures.

Centralized Exam Coordinator

  1. Centralized Exam Coordinator responsibilities include:

    1. Maintaining current Headquarters (HQ) inventory on the T-31 NBFI Database.

    2. Identifying MSBs for examination by using information from branch and/or agents lists and other sources used to identify exams.

    3. Working with the BSA ECS Group Manager in the selection of cases to support the Annual Work Plans.

    4. Selecting MSBs for examination using risk-based analysis with the highest potential of noncompliance and create a list of potential MSBs for examination.

    5. Take into account the priorities in the annual work plan, available resources (potential leads, FinCEN requests, etc.) and balanced coverage (geographic area and industry), to deliver workload to BSA field groups to meet BSA Program goals.

    6. Updating the T-31 NBFI Database, if applicable, when a list of branches and/or agents related to the headquarter examination is received from the lead examiner.

    7. Sending historical data on branches and/or agents to the lead examiner, so branches and/or agents can be selected for examination.

    8. Building administrative files on branches and/or agents selected for examination.

    9. Obtaining BSA ECS Manager concurrence for the selected branches and/or agents for assignment to the Field.

    10. Assigning and sending branch and/or agent administrative files to the Field Groups that cover the geographic area where branches and/or agents are located.

    11. Emailing via encrypted or secure email a list of the selected branches and/or agents and group assignments to the lead examiner.

    12. Monitoring all cases during the examination process and after closure.

    13. Providing to BSA Field and ECS management monthly reports on all, branch and agent examinations assigned and closed.

    14. Providing information on HQ to BSA Policy and others, upon request.

  2. Refer to BSA Policy SharePoint site for more information on building, branch and agent administrative files.

  3. To ensure fairness in case selection, the BSA ECS Manager will review the decisions to select cases in accordance with IRM 4.26.3.6.

Casino Coordinator

  1. Casino Coordinator duties include:

    1. Identifying casinos under BSA jurisdiction by using information from the IRS Office of Indian Tribal Governments (ITG), the National Indian Gaming Commission, the Gaming Business Directory and other sources.

    2. Performing internal outreach efforts to promote the utilization of Form 5346, Examination Information Report, (Form 5346) to generate BSA leads.

    3. Receiving a list of potential tribal casinos for examination from the ITG contact.

    4. Receiving potential leads and requests for examinations from various sources.

    5. Creating a list of potential casinos for examination from the T-31 NBFI database.

    6. Working with the BSA ECS Group Manager in the selection of cases to support the Annual Work Plans.

    7. Selecting casinos for examination by using risk-based analysis with the highest potential of noncompliance. The analysis should be on Currency Transaction Reports-Casino and Suspicious Activity Report-Casino filed by the casino compared to the gaming operation performed.

    8. Building administrative files.

    9. Obtaining BSA ECS Group Manager concurrence for the selected casinos for assignment to the Field.

    10. Maintaining casino information on the T-31 NBFI database. This includes monitoring the cases during the exam and after closure making sure the database has the most current information on the casino.

    11. Providing to management a monthly report on all casino examinations assigned and closed.

    12. Providing information on casino examination results for tribal casinos to ITG per MOU between ITG and BSA.

    13. Providing information on casino examinations to BSA Policy and others upon request.

    14. Remaining current with casino procedures, MOUs and BSA Program Goals.

    15. Being aware of available personnel to conduct the exams and the geographical areas they cover.

  2. Refer to BSA Policy SharePoint site for more information on building administrative files and preparing monthly reports.

  3. To ensure fairness in case selection, the BSA ECS Group Manager will review the decisions for casino cases in accordance with IRM 4.26.3.6.

Compliance Initiative Coordinator

  1. Compliance Initiative Coordinator duties include:

    1. Receiving requests for compliance initiative exams from Field Groups, Policy, FinCEN or other sources.

    2. Receiving approved lists of compliance initiative exams or non-compliant areas or industries. For example, Geographic Targeting Order from FinCEN.

    3. Identifying and creating a list of non-compliant areas or industries for examination. For example, receiving information from the Field groups about non-compliant areas and the applicable law.

    4. Working with the BSA ECS Group Manager in the selection of cases for approved compliance initiative exams to support the Examination Work Plans.

    5. Selecting entities for examination by using risk-based analysis with the highest potential of non-compliance. Case selection factors for risk-based analysis includes using the information in IRM 4.26.3.2.3.1.

    6. Building administrative files.

    7. Obtaining BSA ECS Group Manager concurrence for the selected entities for assignment to the Field.

    8. Maintaining compliance initiative exam case information on the T-31 NBFI Database by monitoring Project Code 120.XX, related to these exams.

    9. Providing to management both detailed and summary monthly reports of all compliance initiative exams assigned and closed.

  2. Refer to BSA Policy SharePoint site for more information on building administrative files and preparing monthly reports.

  3. To ensure fairness in case selection, the BSA ECS Group Manager will review the decisions to select cases in accordance with IRM 4.26.3.6.

State BSA MOU Coordinator

  1. The BSA MOU Coordinator is responsible for receiving quarterly reports for each state with which IRS BSA has an MOU. The duties include:

    1. Retrieving state examination reports and state lists of registered MSBs from the FinCEN Portal.

    2. Filing information in the individual state folder on the BSA AML00 share drive.

    3. Updating the Title 31 database and adding newly-identified entities.

    4. Providing quarterly and annual reports to FinCEN per the BSA-FinCEN MOU.

    5. Providing quarterly reports of BSA examinations to the state liaison with which BSA has an MOU.

  2. Refer to BSA Policy SharePoint site for more information on procedures for using/updating State Quarterly information.

  3. The State BSA MOU Coordinator is responsible for providing the Violation and Headquarters Reports and a list of MSBs quarterly per the MOU.

  4. Email via encrypted or secure email each state’s quarterly reports to the BSA State MOU Liaison with a copy to BSA ECS Group Manager, by the 15th of the month following the end of the quarter.

  5. Refer to BSA Policy SharePoint site for more information on procedures for preparing the Violation and Headquarters Reports and lists of MSBs.

FinCEN BSA MOU Coordinator

  1. The FinCEN BSA MOU coordinator provides quarterly reports to the BSA FinCEN Liaison by end of the month, following the end of the quarter.

  2. The FinCEN BSA MOU Coordinator emails reports, via encrypted or secure email, to the BSA FinCEN Liaison, along with copies to the BSA ECS Program Manager and Group Managers quarterly. The Letter 1112(Title 31 Violation Notification Letter) & NI (No Issue) Report Database is also sent with the reports.

  3. Letter 1112, Letter 4029, Bank Secrecy Act No Change Letter, and the L1112 & No Issue (NI) Report Database are burned to a CD and mailed directly to the FinCEN BSA Liaison by the FinCEN BSA MOU Coordinator quarterly.

  4. Refer to BSA Policy SharePoint site for more information on procedures for preparing the FinCEN quarterly reports.

  5. The FinCEN BSA MOU Coordinator provides two annual reports to the BSA FinCEN Liaison by end of the fiscal year, October 31, XXXX.

  6. The FinCEN BSA MOU Coordinator will email via encrypted or secure email the two reports to the BSA FinCEN Liaison and copy the BSA ECS Program and Group Managers, Senior Program Analyst along with the Total T-31 Entities Examined Database and the Total Title 31 Entities Database.

  7. Refer to BSA Policy SharePoint site for more information on procedures for preparing the FinCEN annual reports.

New Entity/Entity Update Coordinator

  1. Responsibilities of the New Entity/Entity Update Coordinator include:

    1. Checking the T-31 NBFI database to ensure new entities submitted by BSA Examination are not already listed.

    2. Checking the "Do not work" listing provided by the Centralized Exam Coordinator. If listed, the entity will need to have freeze code "C" added.

    3. Sending new entities to the database administrator to be added to the database.

    4. Assigning new entities to the tax examiner to perfect the entity information and prepare the Letter 1052.

    5. Updating the T-31 NBFI Database when the tax examiner has marked the entity complete.

    6. Closing out as an ECS survey any case that has a reason not to be examined.

    7. Surveying the entity from the T-31 NBFI Database and deleting the copy of the Letter 1052 from the BSA AML00 share drive for all Letter 1052 returned undeliverable.

    8. Sending updated information on existing database entities received from the field to the database administrator after researching to confirm accuracy.

  2. Refer to BSA Policy SharePoint site for more information on procedures for new entities and issuance of Letter 1052 procedures.

Form 8300 Program

  1. ECS is responsible for delivering inventory of NFTBs subject to Form 8300 requirements under Title 26 IRC 6050I and Title 31 (31 USC 5331).

  2. This subsection describes the functions and responsibilities that comprise the ECS Form 8300 program.

Identification of Form 8300 Entities

  1. BSA ECS is responsible for identifying for examination, trades or businesses that may conduct transactions in which they receive in excess of $10,000 in cash and have a requirement to file Form 8300. Resources that can be used to identify trades or businesses include:

    1. Classified section of the phone book and the business-to-business phone book.

    2. Realtor listings.

    3. Leads from CI.

    4. FCQ.

    5. State law enforcement agency data.

    6. Information from other examinations.

    7. Internal and external databases.

    8. Examiner referrals from physical observation and interviews (BSA New Entity/Competitor Form).

    9. Neighborhood publications.

    10. Listing from the IRS Office of Research and Analysis.

    11. Special reports from the BSA Compliance Department, Detroit.

    12. Newspapers, magazines, or other periodicals.

    13. The internet.

    14. Compliance Data Warehouse (CDW).

Form 8300 Program Coordination

  1. ECS Form 8300 Coordinator’s responsibilities include:

    1. Analyzing current inventory levels of field groups to ensure the steady flow and adequate assignment of cases.

    2. Performing data analytics utilizing internal IRS and publicly available external sources.

    3. Ensuring entities are not controlled by CI.

    4. Establishing case controls on the Examination Return Control System (ERCS).

    5. Delivering priority cases, such as those needed for disaster declarations, training, geographic targeting orders, etc.

    6. Grading and classifying selected cases using case selection methodology referenced in IRM 4.26.3.3.3. Grading and classification sheets are available on the BSA SharePoint BSA ECS site.

    7. Obtaining BSA ECS Group Manager concurrence for the selected cases for assignment to the Field.

    8. Sending the administrative case file to the field group, accompanied by Form 3210.

    9. Assigning cases to the groups one week after the receipt of the month end of cycle report.

    10. Working with ECS and Policy staff to develop and maintain Form 8300 related Charter/Initiatives within the CDW environment.

  2. Administrative duties of the BSA ECS Form 8300 Coordinator include:

    1. Maintaining Form 8300 inventory on ERCS.

    2. Maintaining physical control of unassigned Form 8300 inventory.

Form 8300 Case Selection

  1. ECS Form 8300 Coordinator case selection responsibilities include:

    1. Selecting entities for Form 8300 examinations using risk-based analysis to identify entities with highest potential for noncompliance. See IRM 4.26.3.3.3.1 for selection factors.

    2. Taking consideration of the priorities outlined in the annual work plan, available resources, case grading guidelines, balanced coverage (geographic area and industry) and anticipated field inventory needs when selecting entities for examination.

  2. Case selection methodology is based on the above responsibilities and the BSA ECS Coordinator’s expertise. The BSA Form 8300 Coordinator will:

    1. Maintain a workbook of potential 8300 entities for each BSA territory, to include a spreadsheet of cases for each group’s coverage area; for review and selection of cases.

    2. Document on the spreadsheet the methodology used for selecting cases for examination. For example, entity located in a HIDTA area, cash intensive business with no/unusual Form 8300 or CTR filing patterns.

  3. To ensure fairness in case selection, the BSA ECS Group Manager will review the decisions to select cases in accordance with IRM 4.26.3.6.

Form 8300 Case Selection Factors
  1. Case selection responsibilities include identifying entities using a risk-based approach to identify cases with the potential for the greatest positive impact on compliance. Factors used in the process may include:

    1. Cash intensive entities currently filing income tax returns and/or employment tax returns with no financial information on FCQ.

    2. Entities in geographic areas with high potential for money laundering such as HIDTAs and HIFCAs.

    3. Entities with a previous history of noncompliance.

    4. Entities cited for poor or inadequate recordkeeping.

    5. Entities with unusual Form 8300 or CTR filing patterns.

    6. Entities referred by Federal, state, or local law enforcement or regulatory agencies.

    7. Entities with gross revenue disproportionate to Form 8300 and CTR filings.

    8. Entities with anomalies in bank CTR or SAR filings.

    9. Entities identified through other BSA examinations, e.g., during a centralized examination of another entity.

Form 8300 Non-Selection

  1. An entity may not warrant an examination at this time; when the Form 8300 Coordinator analyzes case research and deems it low potential based on Form 8300Case Selection Factors in IRM 4.26.3.3.3.1.

  2. The Form 8300 Coordinator will non-select the case as follows:

    1. Document the reason for non-select in the column "Reason for Non-Select" on the Form 8300 spreadsheet.

    2. Document the reason for non-select on the activity record and attach all research used to make the determination.

    3. Send non-select packets to the manager monthly, at end of cycle.

  3. To ensure fairness in case selection, the BSA ECS Group Manager will review the decisions to non-select cases in accordance with IRM 4.26.3.6.

Form 8300 Case Building and Case File

  1. All Form 8300 case building activities must be recorded on Form 9984 with the date completed.

  2. The Form 8300 case file must include:

    1. IDRS research.

    2. ERCS print.

    3. FCQ research with any SAR information protected in a secure and confidential envelope.

      Note:

      Refer to IRM 4.26.14.6.2(8), SAR Disclosure by Government Officers and Employees, for detailed security procedures for safeguarding SAR information.

    4. Information confirming business address and type, e.g., web page print or yellow page information.

    5. Form 8300 Classification Sheet available on the BSA Policy SharePoint site.

    6. Form 8300 Case Grading Sheet available on the BSA Policy SharePoint site.

BSA Information Leads

  1. During the course of a BSA examination, information may be uncovered pertaining to the financial transactions of individuals and businesses. This information may have a material impact on tax compliance under Title 26 of the IRC. The BSA Field Group is responsible for preparing Form 5346 for referral of the information.

  2. BSA Field Groups will electronically forward the income tax or employment tax leads on Form 5346 to BSA ECS using the *SBSE BSA Info Reports/Referrals mailbox. Referrals received by the mailbox are forwarded to Exam Field Support within 10 business days.

  3. IRS CI referral leads will be submitted using as an example IRM Exhibit 25.1.12-2, Sample Memorandum to Transmit leads from BSA to CI, and a copy electronically forwarded to: *SBSE BSA Info Reports/Referrals.

  4. All information reports sent to ECS are tracked, monitored and monthly reports are provided to BSA Management.

Using Referrals in Title 31 and Form 8300

  1. Referrals may be received from FinCEN, SAR Review Teams, CI groups, BSA group and other sources, regarding the activity of an NBFI or an NFTB. The Coordinator will include the information in the case file in a sealed and confidential envelope.

  2. The BSA Coordinator will exercise independent judgment on the appropriate BSA action to take on referrals received. Any action, such as assigning the case for a Title 31 or Form 8300 examination, is to be based on the same criteria used to select any other BSA work.

  3. Under the direction of management with Coordinator concurrence, SAR referrals should be given priority consideration, case-built and sent to the Field.

  4. When the referral information source is a SAR, the responsibility for the security and use of the SAR and the SAR data is with each person having access. The information is sensitive and must be treated accordingly. Refer to IRM 4.26.14.6.2(8) , SAR Disclosure by Government Officers and Employees, for detailed security procedures for safeguarding SAR information.

  5. The referral information may be used only for a purpose related to a criminal, tax, or regulatory investigation or proceeding, or in the conduct of intelligence or counterintelligence activities to protect against international terrorism.

  6. The information contained in a SAR cannot be further released, disseminated, disclosed, or transmitted without prior approval of the Director of FinCEN or his authorized delegate. No SAR information, including the existence of a SAR, may be disclosed in the course of any BSA activity to the examined entity or to any other person or entity outside the IRS. A SAR must be treated with particular care given the unsubstantiated allegations of possible criminal activity it contains, akin to allegations contained in confidential informant tips. Such reports, or the fact they have been filed, may not be disclosed by a government employee to any person involved in the transaction, "other than as necessary to fulfill the official duties of such officer or employee." 31 USC 5318 (g)(2)(ii). Unauthorized release of information collected under the BSA may result in criminal or civil sanctions. SAR information is extremely sensitive data.

  7. Since disclosing SAR information would identify a confidential informant and would seriously impair a civil or criminal investigation, use of a SAR-based lead in Title 31 or Form 8300 activities is restricted in the same manner as its use in any examination. (See IRM 4.26.14, Bank Secrecy Act, Disclosure.) Prohibited actions include:

    1. Disclosing to anyone outside the IRS that a SAR has been filed

    2. Proposing a reporting violation based solely on information contained in a SAR, CI referral, or other referral

    3. Disclosing a source or possible source of SAR information

    4. Conducting the examination in a manner in which the trade or business could reasonably conclude any of the above

  8. Civil and criminal penalties may apply with respect to the unauthorized disclosure of SARs. Such disclosures undermine the very purpose for which the suspicious activity reporting system was created—the protection of the nation’s financial system through the prevention, detection and prosecution of financial crimes and terrorist financing. The unauthorized disclosures of SARs can compromise the national security of the United States and threaten the safety and security of those institutions and individuals who file such reports. An unauthorized disclosure of SAR information is a very serious matter. All such unauthorized disclosures by IRS personnel are investigated. The IRS is committed to continuing to work with FinCEN, the Federal functional regulatory agencies, law enforcement and the financial services industry to ensure that the information contained in SARs is safeguarded.

  9. SARs, like all BSA reports, are exempt from the disclosure provisions of 5 USC 552, Freedom of Information Act.

Review of Performance

  1. The BSA ECS Group Manager (or designee) will, at minimum, review a sample of 10% of the overall completed employee classification efforts and survey decisions quarterly to ensure selects and non-selects adhere to examination case selection policy.

  2. As part of the Program Review process, the BSA ECS Program Manager (or designee) ensures the BSA ECS Group Manager reviews adhere to the examination case selection policy.

  3. Reviews will be documented and discussed with the coordinator and copy retained by the BSA ECS Program Manager (or designee).

Liaison

  1. Contacts with other operating divisions or with state and local government agencies should first be discussed with management.

  2. ECS Group Managers will ensure that the current MOU for each state agency is followed when exchanging BSA information. They will also ensure that appropriate information is provided to and received from state agencies as provided in the specific MOU.

BSA ECS FCQ Audit Reports

  1. BSA ECS provides an audit trail report to SB/SE managers for their employees. The report is a history of the query parameters used by the FCQ user.

  2. Managers requesting audit trail information on specific FCQ system users as IRM 4.26.4.6 (7) should send an email via encrypted or secure email request to "SBSE.FCQ.AUDIT.TRAIL."

  3. The BSA ECS analyst will receive an email from the FinCEN Senior Special Agent that the FCQ data audit log is available. The analyst will download the data from FinCEN an email and save to the SBU "Audit Log" folder. The data should be renamed to the month of the download, i.e.,"April Audit Log."

  4. The BSA ECS Analyst will notify the BSA ECS Secretary when prior month audit trail data has been downloaded to the Audit Trail Database on the BSA AML00 Shared Drive.

  5. The BSA ECS Secretary will retrieve manager requests for audit trail data, create the audit trail reports and email via encrypted or secure email the reports to the manager.

  6. The BSA ECS Secretary will prepare a monthly report at the end of the cycle and email via encrypted or secure email to the BSA ECS Program Manager.

  7. Refer to BSA Policy SharePoint site for more information on BSA ECS FCQ Audit Report Request procedures.