- 4.26.14 Disclosure
- 18.104.22.168 Overview of Access, Security, and Disclosure
- 22.214.171.124 Access to Title 26 Returns and Return Information
- 126.96.36.199.1 Related Statute Exception
- 188.8.131.52.2 Related Statute Procedures
- 184.108.40.206.3 Related Statute Determination Factors
- 220.127.116.11.4 Effect of Related Statute Determination
- 18.104.22.168 Access to Title 31 Reports
- 22.214.171.124.1 Access For BSA Compliance Purposes
- 126.96.36.199.2 Access (Other than SARs) for Tax Purposes
- 188.8.131.52.3 Access to SARs for Tax Purposes
- 184.108.40.206 Disclosure of Tax Information
- 220.127.116.11 Disclosure of BSA information
- 18.104.22.168.1 Disclosure of BSA Information to Governmental Entities
- 22.214.171.124.2 Disclosure of BSA information to Non-Governmental Entities
- 126.96.36.199.3 Procedures for Disclosure of BSA information (Other than SARs)
- 188.8.131.52 SAR Disclosure
- 184.108.40.206.1 SAR Disclosure by Financial Institutions or Their Employees
- 220.127.116.11.2 SAR Disclosure by Government Officers or Employees
- 18.104.22.168.3 SAR Disclosure in Tax Cases
- 22.214.171.124.4 SAR Unauthorized Disclosure Procedures
- 126.96.36.199 Form 8300 Disclosure Rules
- 188.8.131.52 Penalties for Unauthorized Access and Disclosure
- 184.108.40.206.1 Penalties for Unauthorized Access and Disclosure under IRC
- 220.127.116.11.2 Penalties for Unauthorized Access and Disclosure under BSA
- Exhibit 4.26.14-1 Letter Agreement titled Electronic Access by the IRM SB/SE to BSA Information for Title 31 Purposes
- Exhibit 4.26.14-2 Memorandum of Understanding Dated September 24, 2010
- Exhibit 4.26.14-3 Re-Dissemination Guidelines for Bank Secrecy Act Information
Part 4. Examining Process
Chapter 26. Bank Secrecy Act
Section 14. Disclosure
July 24, 2012
(1) This transmits revised text for IRM 4.26.14, Bank Secrecy Act, Disclosure.
(1) Text was revised to reflect new case law and administrative guidance.
(2) This revision updates titles and terms, and cross references to other IRMs.
(3) New subsection 18.104.22.168.4 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) Exhibits were updated to reflect recent agreements with the Financial Crimes Enforcement Network (FinCEN).
(5) Citations from 31 CFR Part 103 were renumbered to 31 CFR Chapter X, effective March 1, 2011.
(6) This revision incorporates interim guidance published as Interim Guidance Memo SBSE-04-0311-030 and subsequently reissued as Interim Guidance Memo SBSE-04-0312-028.
William P. Marshall
Small Business/Self Employed
Access involves obtaining returns or return information. Returns and return information must be stored in a secure location. Disclosure involves disclosing or re-disseminating information already possessed.
Access to Title 26 returns and information such as tax and information returns is governed by IRC 6103. IRS controls access.
Access to Title 31 reports and Bank Secrecy Act (BSA) information is controlled by the Financial Crimes Enforcement Network (FinCEN). The Title 31 reports and their information are currently available electronically through the Web Currency and Banking Retrieval System (WebCBRS). WebCBRS is maintained by the Internal Revenue Service but FinCEN owns the information on BSA reports and controls access. Title 31 BSA reports are confidential and may not be accessed or disclosed except as authorized by FinCEN. A list of BSA forms is available on www.fincen.gov and on the home page of WebCBRS. FinCEN is in the process of setting up its own system for the receipt of electronically filed BSA reports. This information will be transferred to WebCBRS so that examiners may continue to use WebCBRS with confidence.
The Form 8300 serves a dual purpose. The form is used to meet both a Title 31 and a Title 26 reporting requirement.
Accessed information must be protected to prevent unauthorized disclosures.
Disclosure occurs both when an examiner accesses data and "discloses" it to himself and when the examiner disseminates information already held to another. Such disclosure is unauthorized if made for a purpose that was not authorized in the original access to the information.
It is possible to disclose to oneself. For example, if an examiner obtains return information in a Title 26 Form 8300 case that indicates that there is a Title 31 violation, e.g., a CTR violation, and the examiner then uses the Title 26 information to begin a Title 31 case without first making a related statute determination, the examiner may have made an unauthorized disclosure to himself. Access under Title 26 was authorized, but a related statute determination would be needed to use the information for Title 31 compliance purposes. See the discussion below on related statute determinations.
The rules governing access to and disclosure of returns and return information under the Internal Revenue Code (IRC) (Title 26) are different from the rules governing access and disclosure of information collected under the Bank Secrecy Act (BSA) (Title 31).
In addition to the disclosure rules under Title 26 and Title 31, IRS examiners must always limit access to information in accordance with the Taxpayer Browsing Protection Act of 1997. See the discussion of UNAX below.
Unauthorized Access (UNAX) of taxpayer accounts is forbidden. The purpose of the UNAX Program is to provide awareness to all IRS employees to ensure that employees do not improperly access information. More information on UNAX is available on the Privacy, Information Protection and Data Security (PIPDS) web site at http://pipds.web.irs.gov/unax. Additional information can also be found in IRM 10.5.1, Privacy, Information Protection and Data Security Policy and Guidance.
IRS examiners should access only that information that is necessary and relevant to the case (i.e., information that they have a need to know), whether accessing the Integrated Data Retrieval System (IDRS) or WebCBRS or any other system of records. The same prohibition on browsing applies to both tax and BSA data.
IRS employees are never authorized to access their own records or records of other persons with whom they have personal ties. These may include:
Spouse and ex-spouses; children; parents; anyone living in their household; other close relatives;
Friends or neighbors with whom they have close relationships;
An individual or organization for which they or their spouse is an officer, trustee, general partner, agent, attorney, consultant, contractor, employee, or member; and
Any other individual or organization with which they may have a personal or outside business relationship that could raise questions about their impartiality in handling the tax matter.
In addition, IRS employees may not access information about celebrities when the information is not needed to carry out the official duties of the employees.
When employees are working authorized assigned cases or making personal or telephonic contacts, they can access other IRS employees' tax records. However, when the employee working the authorized case knows the other IRS employee, the case must be referred to management for reassignment.
IRS employees with UNAX questions should request that their manager verify and authorize access to an account. UNAX questions are directed via e-mail to *UNAX.
UNAX violations including unauthorized access to Title 31 data must be reported immediately by contacting the Treasury Inspector General for Tax Administration (TIGTA) Hotline at 800-366-4484. View the map on their web site at http://www.treasury.gov/tigta/ to find the local office.
UNAX violations can lead to penalties and/or dismissal.
Criminal UNAX violations result from intentional unauthorized inspection of returns and return information. 26 USC 7213A. The violation is punishable by a fine not to exceed $1,000 or imprisonment of not more than 1 year, or both, together with the costs of prosecution. Federal employees will be dismissed.
In addition to the general "need to know" rules of UNAX, there may be specific limitations of access.
Limitations of access are found in laws restricting disclosure, which mean in effect that persons who would like access to certain information cannot get access because the holders of the information cannot disclose it to them. An example of this is found in the restriction of the use of tax return information for nontax purposes. An examiner cannot use information obtained during a tax case in a BSA case unless a related statute determination has been made. See the related statute discussion below.
Other limitations of access may be administrative. For example, some employees are only authorized to receive and use Suspicious Activity Report (SAR) information on an open, assigned case, but may not obtain it electronically. Such employees must request the information from "gatekeepers" who will access the SAR information from WebCBRS and then provide it to them. SAR information is typically requested when:
WebCBRS indicates possibility of SARs.
Taxpayer banking information is unknown.
Taxpayer is suspected of hiding income or assets.
Potential fraud indicators suggest the taxpayer is operating in cash to avoid reporting income or to evade collection.
Title 26 returns and return information are owned by IRS. Tax returns and tax return information are confidential. Access to Title 26 returns and return information is governed by the Internal Revenue Code.
Returns and return information are confidential and may not be disclosed except as authorized by IRC 6103. In other words, access to returns and return information is limited by the provisions of IRC 6103.
The term "return" means any tax or information return required under Title 26. Form 8300 is both an information return covered by IRC 6103(b)(1) and a BSA report.
"Return information" means a taxpayer's identity; the nature, source, or amount of his…receipts…; and [related background information] but such term does not include data in a form that cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer. IRC 6103(b)(2).
The term "taxpayer return information" means return information that is filed with, or furnished to the Secretary by or on behalf of the taxpayer to whom such return information relates. IRC 6103(b)(3).
IRC 6103 allows for certain exceptions to the prohibition on disclosure of returns and return information.
Returns and return information are, without written request, open to inspection by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for tax administration purposes. IRC 6103(h)(1).
Access to Title 26 returns and related return information is available to IRS employees who need this information for their tax administration work through the various databases maintained by IRS, such as the Integrated Data Retrieval System (IDRS).
A tax administration purpose under IRC 6103(h)(1) is the basis for access to returns and return information by revenue agents; for example, those conducting Form 8300 examinations under Title 26.
IDRS contains return information and generally may not be accessed for BSA (Title 31) purposes. BSA examiners must not access IDRS while pre-planning or conducting BSA activities. Once a BSA examination is closed from the examiner’s group, IDRS may be used to evaluate and develop income tax leads related to tax administration that were generated by the BSA activity.
The return and return information may be disclosed to the taxpayer and persons appointed by the taxpayer.
Such disclosures should not be done if a determination has been made that the disclosure would seriously impair tax administration. IRC 6103(e)(7). Contact the Office of Disclosure when considering such a determination.
IRC 6103 allows for numerous other exceptions to the general prohibition on disclosure. See IRM 11.3.1, Introduction to Disclosure.
Generally, BSA examiners will not have access to return information when conducting a BSA examination.
IDRS cannot be consulted during a Title 31 examination; and
Title 31 examiners should not request to inspect income tax returns or other Title 26 return information during the Title 31 examination.
If a Form 8300 examination is conducted under the authority provided in Title 26 at section 6050I, the examiner may access IDRS and other sources of return information because the access is considered to be for purposes of tax administration. IRC 6103(h)(1).
Tax administration means the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or equivalent laws and statutes of a state) and tax conventions to which the United States is a party, and the development and formulation of Federal tax policy relating to existing or proposed internal revenue laws, related statutes, and tax conventions. IRC 6103(b)(4).
Depending on the facts of a particular case, the Bank Secrecy Act may be considered a related statute for purposes of access to returns and return information when the BSA activity was done in furtherance of, or as a part of, a pattern designed to violate Title 26 laws. See the discussion on the related statute exception, below.
Instructions and guidelines relating to disclosure of information from tax returns and other IRS documents, including disclosure under the Freedom of Information Act (FOIA), 5 USC 552, and the Privacy Act, 5 USC 552a, are published in IRM 11.3.22, Disclosure to Federal Officers and Employees for Tax Administration Purposes. Refer also to IRM 22.214.171.124, Money Laundering and Currency Crimes, The Money Laundering Investigation and Disclosure, for more information relating to the use of returns and return information in criminal money laundering investigations.
Questions about disclosure should be directed to an IRS Disclosure Officer. A listing of disclosure officers can be found on the Disclosure home page located in Privacy, Governmental Liaison and Disclosure (PGLD) on the IRS intranet. Much of this information is for IRS employees only.
Under the IRC, anyone making an unauthorized disclosure may be subject to civil and criminal sanctions.
IRC 6103(h)(1) provides that returns and return information shall, without written request, be open to inspection by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for tax administration purposes. IRC 6103(b)(4) provides that the term "tax administration" means the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or equivalent laws and statutes of a state) and tax conventions to which the United States is a party.
The BSA (codified, in part, in Title 31) is not "per se" (automatically) related to the Internal Revenue Code. This is because BSA reports are required not only for tax compliance purposes but for other governmental purposes that are consistent with the purpose of the BSA, such as for law enforcement and counterterrorism purposes. A related statute determination is based on an analysis of the facts and circumstances of the particular case.
For a related statute determination, IRM 126.96.36.199.1 provides that the test is whether, under the particular facts and circumstances of the case, the BSA provisions are considered related to the administration of the internal revenue laws.
If the related statute test is not met, returns and return information may not be accessed or disclosed for examination of non-tax matters.
If information is uncovered in a Title 26 examination that indicates that there has been a Title 31 violation, there must be a related statute determination before the Title 26 return or return information can be used in the Title 31 examination or in written referrals to Criminal Investigation or FinCEN.
If, in an ongoing Title 31 examination, Title 26 return information is needed, a related statute determination must be made before using return information in the Title 31 examination.
A determination must be made in writing with regard to the related statute test prior to the access or disclosure of returns or return information. The examiner documents the reasons supporting the related statute determination in a written memorandum, known as the related statute memorandum. The determination is made by a Territory Manager, not the examiner.
A special related statute memorandum has been developed for Report of Foreign Bank and Financial Accounts (FBAR) cases. It is Form 15535, Foreign Bank and Financial Accounts Report Related Statute Memorandum, Catalog # 38150X. See IRM 4.26.16. However, other types of related BSA cases do not require a specific format for the required related statute memorandum.
A good faith judgment that the BSA violation was in furtherance of the Title 26 violation should be demonstrated by tangible objective factors and supported by adequate documentation. The reasons supporting the determination are noted on the related statute memorandum.
Once the related statute memorandum has been signed by the Territory Manager, the Title 26 information may be accessed and used in the BSA examination. The original memorandum and determination should be included in the Title 31 file and a copy should be included in the Title 26 file.
IRC sections 6103(b)(4) and (h)(1) together permit disclosure of Title 26 information to IRS employees for examination purposes when there is a good faith determination that a Title 31 violation was committed in furtherance of a Title 26 violation or was part of a pattern to violate the provisions of Title 26. Once a related statute call has been made, IRC sections 6103(b)(4) and (h)(1) allow IRS employees, whose official duties require access to tax returns and tax return information, to use it in an examination under Title 31.
A money laundering or Bank Secrecy Act provision will be deemed a "related statute" if the money laundering or Bank Secrecy Act violation:
Was committed in furtherance of a violation of the internal revenue laws, or
Is part of a pattern of violations of the internal revenue laws.
It is not necessary to establish with certainty that there was a Title 26 violation to meet the related statute test, but the determination must be a good faith determination.
Large amounts of currency being deposited and concealed from the IRS is an indication that taxable income has been earned that has not been reported on an income tax return. IRM 188.8.131.52.1.
Taxpayers who have a financial account in a foreign country may be required, under the BSA, to file a Report of Foreign Bank and Financial Accounts (FBAR) disclosing the existence of the foreign account. When a taxpayer fails to comply with the Title 31 FBAR filing requirement and also fails to report interest income from the foreign financial account in violation of Title 26, the failure to comply with the FBAR requirement, may indicate the non-compliance was done in furtherance of a tax violation under Title 26, making the Title 26 information available for use in the Title 31 case under the related statute test.
To make a related statute determination, the Territory Manager must make a good faith determination that the Title 31 violation was in furtherance of a Title 26 violation. If it is subsequently determined that there was no Title 26 violation, this does not prevent the Title 31 examination from going forward.
The related statute determination allows IRS personnel to use returns or return information derived from a tax case for examination of activities in a Title 31 case for which the IRS has responsibility.
The determination that the statutes are related makes the Title 31 case a matter of tax administration for purposes of IRC 6103. The information gathered in the Title 31 investigation from this point forward is subject to the disclosure rules under IRC 6103.
The information can be disclosed within Treasury for purposes of tax administration. The Title 31 case can be disclosed to FinCEN, a Treasury bureau, for penalty assessment and/or collection purposes. IRC 6103(h)(1). It can also be disclosed to the Department of Justice for enforcement purposes under the rules of IRC 6103(h)(2).
BSA reports are required because of their "usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism," as stated in Declaration of Purpose, 31 USC 5311.
The reports are transcribed to the Web Currency and Banking Retrieval System (WebCBRS) that is access protected for law enforcement use. WebCBRS is maintained by the IRS Enterprise Computing Center-Detroit (ECC-DET) but IRS does not "own" the information reported on BSA forms.
FinCEN has been delegated responsibility for, and ownership of, the BSA report information on WebCBRS. FinCEN has re-delegated BSA examination authority to other government agencies including IRS. As noted above, Form 8300 is a dual purpose form that contains information required to be reported by both Title 31 and Title 26. FinCEN has access to the information reported on a Form 8300 under Title 31 but the form is also an information return under Title 26 at section 6050I and is subject to section 6103 restrictions on disclosure. IRC 6103(l)(15) provides an exception that permits the disclosure of Form 8300 information for Title 31 purposes.
FinCEN and IRS executed a Letter Agreement titled Electronic Access by the IRS SB/SE to BSA Information for Title 31 Purposes on May 20, 2004, Exhibit 4.26.14-1, and a Memorandum of Understanding September 24, 2010, regarding broader electronic access to Title 31 Reports, Exhibit 4.26.14-2.
When IRS employees are engaged in BSA compliance activities they are not acting under Title 26. Because their actions are taken under Title 31 and the BSA, FinCEN controls access.
IRS SB/SE electronic access to Title 31 reports for BSA compliance purposes is governed by a letter agreement, Electronic Access by the IRS SB/SE to BSA Information for Title 31 Purposes, between IRS SB/SE and FinCEN dated May 20, 2004. Exhibit 4.26.14-1.
The letter agreement states that BSA examiners may access WebCBRS for Title 31 compliance purposes.
In a BSA examination, BSA examiners can also access Forms 8300 for transactions occurring on or after January 1, 2002, except for forms filed by court clerks.
IRS SB/SE BSA personnel may directly access SAR information on WebCBRS for BSA compliance purposes.
There are extra constraints on the access of Suspicious Activity Report (SAR) information because of their confidential nature. For BSA examinations, SAR access by BSA employees is limited under the letter agreement to SARs filed by the entity under examination or being considered for examination, and SARs filed by other financial institutions reporting on the entity under examination, or SARs relating to any transaction or transactions conducted through such entity.
Care must be taken to avoid using Title 31 examinations as a pretext for conducting Title 26 information gathering activities. The decision in United States v. Deak-Perera, 566 F. Supp. 1398 (D.D.C. 1983), served as a warning that the courts will not tolerate the gathering of information based on false or misleading representations on the part of the examiner.
The following procedures should be followed to avoid any appearance of mixing Title 31 and Title 26 activities:
The scope of any Title 31 examination should be based on objective factors and not expanded to obtain additional information for any other purpose; and
The information obtained within the scope of the Title 31 activity, which appears to have Title 26 implications, should be reported on Form 5346, Examination Information Report, and forwarded to the BSA Workload Selection Coordinator in WISDM.
One of the purposes of the Bank Secrecy Act, as set out in 31 USC 5311, is to provide reports and records considered to be of high utility in tax matters. As "tax" is one of the uses envisioned for BSA information, IRS employees have access to most Title 31 reports on WebCBRS for tax matters and may use the information accessed from WebCBRS in Title 26 proceedings.
Because of SARs' confidential nature, FinCEN made a separate determination on SAR access. See discussion, Access to SARs for Tax Purposes, below.
SAR information may be helpful in examination and collection activities when:
The Web Currency and Banking Retrieval System (WebCBRS) reflects a Currency Transaction Report (CTR);
Routine means of locating banking information is exhausted;
Potential fraud indicators are present; or
It appears the taxpayer may be engaging in an unusually large number of cash transactions or cash transactions of unusually large amounts to avoid proper reporting of income or to evade collection.
IRS employees may want to use SAR information to:
Summon new bank accounts;
Attempt to locate taxpayer at new location; or
Levy newly-identified sources.
Access to BSA information through WebCBRS for tax purposes is governed by the Memorandum of Understanding between FinCEN and IRS dated September 24, 2010. Exhibit 4.26.14-2.
The MOU covers electronic access to all BSA report information including SAR information, with the exception of Forms 8300. Access to Form 8300 is permitted outside the MOU because of its dual nature as both a Title 26 and a Title 31 form.
Authorized agency personnel may access the Title 31 report information including SAR information. Training on appropriate safeguards and use must be completed prior to access. Queries to obtain the reports should be as focused as possible on the particular subject. An audit trail of all accesses will be maintained.
Interim guidance was issued by the SB/SE Commissioner on March 29, 2011 and reissued on March 15, 2012. The guidance:
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.
Limits SAR information requests to active examination and collection cases. Electronic access to SAR information is authorized only when made in connection with specific and assigned tax administration matters. The SAR information may be accessed for case-building activities when the case subject is assigned to a Compliance case-building group, function, or project.
Each operating division or business unit authorized to receive SAR information will issue a policy directive detailing policies and procedures for SAR access for its employees.
Training on SAR information access and security is mandatory prior to any authorized access.
Once SAR information is secured for Title 26 compliance purposes, dissemination of that SAR information is subject to both Title 31 and Title 26 disclosure restrictions. The SARs and SAR information must be protected in the same manner as information received from a confidential informant.
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.
Reviews will be conducted on an annual basis and may be conducted in conjunction with annual workload reviews.
A 30-day period will be selected from the prior 12 months of WebCBRS activity.
Queries will be compared against open inventory for the same 30-day period or will be validated through other business controls to ensure queries were related to assigned cases.
Tax returns and return Information are protected from access and disclosure by Title 26. IRC 6103 prohibits the disclosure of tax returns and return information, as those terms are defined at IRC 6103(b). For example, the examiner must not disclose any return information to a whistle-blower (informant) about the alleged tax violator (e.g., whether or not the alleged tax violator filed a tax return). Taxpayers look to the Service to maintain their returns and associated account information in a secure and confidential manner. Moreover, the Service is required by statute to do so. Such information may not be shared with anyone unless authorized by IRC 6103.
Disclosure to the taxpayer is authorized by IRC 6103(e) and to the taxpayer's designee by IRC 6103(c) unless a determination has been made that such disclosure would seriously impair Federal tax administration under IRC 6103(e)(7). Unless such information meets one of the exemptions to disclosure found in the Freedom of Information Act (FOIA), 5 USC 552, return information may be disclosed to the taxpayer, or his designee, under FOIA. BSA information is specifically exempt from disclosure under the FOIA. 5 USC 552(b)(3), in conjunction with 31 USC 5319.
For example, in a Title 26 Form 8300 case, a taxpayer may be able to obtain the examiner’s work papers under FOIA. However in a Title 31 Form 8300 case, the taxpayer may be more limited in obtaining information under FOIA as BSA reports and records of BSA reports are specifically exempt from FOIA under 31 USC 5319.
In a memorandum dated August 24, 2011 on FOIA obligations, the Deputy Commissioners for Operations Support and for Services and Enforcement stated that under the Open Government Initiative and IRC 6103(e), persons having a material interest in the information, such as the taxpayer, have a right to receive copies of their files to the extent that it will not impair enforcement. Absent an impairment determination, examiners can and should make copies of files available to taxpayers or their authorized representatives upon request. This protects taxpayers' rights and also reduces the need for processing requests under FOIA provisions. The Disclosure staff is available for advice as to what should be redacted.
IRS employees often operate under the exception found in IRC 6103(h), which allows for disclosure to Federal officers and employees for purposes of tax administration. Specifically, IRC 6103(h)(1) states that returns and return information shall, without written request, be open to inspection by or disclosure to officers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for tax administration purposes.
This exception allows for the disclosure of returns and return information within IRS for normal audit purposes.
It is also the basis for the related statute exception.
The related statute exception, as noted in subsection 184.108.40.206.2, provides authority for an examiner having taxpayer-specific information to disclose that tax information in a BSA case when the BSA activity was in furtherance of or as part of a pattern of violations related to tax administration.
For a more comprehensive discussion of disclosure, including exceptions under IRC 6103, see IRM 11.3, Disclosure of Official Information, and IRM 37, Chief Counsel Directives Manual – Disclosure.
When Title 26 information is used in a BSA case, it is both return information and BSA information and is protected from further disclosure, not only by IRC 6103, but also by the disclosure prohibitions of the BSA and the Re-Dissemination Guidelines issued by FinCEN.
Section 5319 of the BSA prohibits the disclosure of BSA reports and records of reports under FOIA or similar "open government" state and local laws. For this reason, return information used in a Title 31 case after a related statute determination has been made cannot be disclosed to the taxpayer or anyone else under FOIA.
Disclosure of BSA information, including SAR information, is governed by the Revised Re-Dissemination Guidelines for Bank Secrecy Act Information (11-28-2007). Exhibit 4.26.14-3.
It is also return information governed by IRC 6103 when the information is gathered and being used for tax administration purposes.
The BSA, at 31 USC 5319, provides that BSA reports and information are to be made available to governmental entities and certain self-regulatory organizations upon request of the head of the agency or organization.
The dissemination must be for the purposes of the BSA described at 31 USC 5311 as criminal, tax, or regulatory investigations or proceedings, or the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism.
The head of the agency must make the request in writing, stating the particular information desired and the criminal tax or regulatory purpose for which the information is sought and the official need for the information. 31 CFR 1010.950(b).
The Secretary may in his discretion disclose information reported under the BSA for any reason consistent with the purposes of the BSA. 31 CFR 1010.950(a).
31 CFR 1010.950 (formerly 31 CFR 103.53) provides additional guidance on disclosures of BSA information to governmental entities. These rules expand upon the types of requests that will be honored from agency heads and adds Congress and its subcommittees to the list of governmental entities to whom BSA information may be disclosed. State and local agencies may be required to pay fees. 31 CFR 1010.950(f).
The regulations are supplemented by Treasury Delegation Order 15-41, dated December 8, 1992, 57 F.R. 58038, which delegates to the Commissioner of Internal Revenue certain other authorities including the authority to disseminate copies of the reports required under the BSA regulations, subject to guidelines and procedures. FinCEN has the authority to set out those guidelines and has done so in the Revised Re-Dissemination Guidelines. Exhibit 4.26.14-3.
Disclosure of BSA information to non-governmental entities is very limited. Disclosure of BSA reports and records is governed by statute, regulation, administrative delegations of authority, and administrative guidelines as well as case law. See 31 USC 5319 and 31 CFR 1010.950.
The BSA, at 31 USC 5319, provides that BSA reports and information are to be made available to governmental entities for purposes consistent with the BSA. This section specifically provides that BSA reports and records of reports are exempt from disclosure to non-governmental entities even under the Freedom of Information Act (FOIA), 5 USC 552.
Section 5319 was amended in December 2011 to expand the prohibition of disclosure so that BSA reports and information also may not be disclosed under any state, local, tribal, or territorial "freedom of information," "open government," or similar law.
31 CFR 1010.960 (formerly 31 CFR 103.54) reiterates the FOIA exemption established by 31 USC 5319, providing that all BSA reports and records are specifically exempt from disclosure under the FOIA. As a result, WebCBRS report information may not be disclosed by an examiner to non-governmental entities, even to the subject of the report.
Very few cases have considered 31 USC 5319. The small collection is set forth in Berger v. I.R.S., 496-97, D.N.J. 2007, aff'd on other grounds, 288 Fed. Appx. 829, 2008 WL 3286782, cert. denied 2009 WL 1650205, June 15, 2009. Documents, including some WebCBRS reports and related information, were sought from IRS under FOIA. Plaintiff argued that 31 USC 5319 was not an absolute prohibition against disclosure of BSA reports, basing this argument on an early version of this IRM that, according to Plaintiffs, provided that with regard to the contents of a WebCBRS report, "the examiner may disclose to the examined entity that a currency report was or was not filed and the contents of the report if any." The court specifically stated that "[E]ven if the [IRM] provision Plaintiffs quote was in effect at that time, this Court finds that WebCBRS reports qualify as reports exempt from disclosure under FOIA and [section] 5319." The reasoning of the court was that the statute clearly did not allow for discretion on the part of IRS. The lesson for IRS examiners is that the courts will consider that there is absolutely no discretion permissible on the part of the IRS examiner. BSA reports and information that would indicate that a BSA report had been filed are not to be disclosed by examiners in response to a FOIA request.
A copy of a report, however, can be provided to the filer of the report. Thus, while a CTR could not be disclosed to the subject of the CTR, it could be disclosed to the filer. Similarly, an FBAR could be disclosed to the filer of the FBAR, who is also, of course, the subject of the FBAR.
BSA reports are exempt from disclosure to the public under the Freedom of Information Act (FOIA), but may be shared between agencies under conditions prescribed in 31 USC 5319, 31 CFR 1010.950, and FinCEN's Re-Dissemination Guidelines found in Exhibit 4.26.14-3.
Disclosure by IRS SB/SE is governed by two documents. One is a letter agreement specific to SB/SE and one is a FinCEN guidance memorandum issued subsequently to all governmental agencies allowed to access BSA information.
The letter agreement between FinCEN’s Director and the IRS SB/SE Commissioner, entitled Electronic Access by the IRS SB/SE to BSA Information for Title 31 Purposes (May 20, 2004), restricts the further dissemination of BSA information obtained under the agreement. Exhibit 4.26.14-1. The letter agreement is binding and requires SB/SE to refrain from dissemination of BSA information to any person without the written permission of FinCEN in each case.
Disclosure is permissible under IRC 6103(h)(1) within IRS for:
SB/SE tax examinations,
Criminal investigations, or
On November 28, 2007, FinCEN issued Re-Dissemination Guidelines for Bank Secrecy Act Information. Exhibit 4.26.14-3. These guidelines apply to the re-dissemination of BSA information in the possession of a Federal, State, or local government agency. BSA information is defined to include a report (and any information in such a report that might reveal its existence) that is filed under the BSA. These guidelines apply to the IRS.
For purposes of the Re-Dissemination Guidelines, the words "disseminate" and its derivatives do not include the notification of a BSA report's existence or any other release of a BSA report between agencies that have been granted direct electronic access to BSA information. Consequently, such disclosures are not subject to FinCEN's approval.
This means that IRS examiners do not need to follow the re-dissemination procedures outlined in the guidelines for disclosures to agencies having direct electronic access to the reports.
This rule has one exception. The disclosing Federal, state, or local government agency shall ensure that each BSA report or item of BSA information shared contains the warning statement set forth in Appendix II to the guidelines. Exhibit 4.26.14-3.
FinCEN’s BSA Re-Dissemination Guidelines require certain procedures.
Appendix I of the Guidelines provides an acknowledgement form that the disclosing agency must receive from the receiving agency. The disclosing agency must provide a copy to FinCEN before providing BSA information to the receiving agency.
The BSA information disseminated must be accompanied by a warning statement Appendix II of the Guidelines. It warns against further re-dissemination.
The disseminating agency must keep records of all disseminations.
The guidelines prohibit any re-dissemination of BSA information not covered in the guidelines without first making a request in writing to FinCEN and obtaining FinCEN’s approval. There is a provision for emergency requests.
The guidelines further state that final authority governing interpretation of the guidelines or dissemination of a BSA report or BSA information rests with FinCEN.
The BSA prohibits anyone with knowledge that a Suspicious Activity Report (SAR) has been made from notifying any person involved in the transaction that the transaction has been reported. 31 USC 5318(g)(2)(A).
The prohibition applies to the financial institution and its employees and officers. The rule regarding persons to whom the prohibition applies was expanded in December 2011 to include former employees or contractors with the financial institution. The rule currently applies to:
The financial institution,
Any director, officer, employee, or agent of such institution (whether or not any such person is still employed by the institution), and
Any other current or former director, officer, or employee of, or contractor for, the financial institution or other reporting person.
The prohibition against disclosing to any person involved in the transaction that the transaction has been reported, also applies to any governmental employee who has any knowledge that such report was made. The type of employee to whom the prohibition applies was expanded in December 2011 to include former officers, employees or contractors.
The covered employees include any current or former officer, or employee of, or contractor for, the Federal government or any state, local, tribal, or territorial government within the United States.
It is, however, permissible to disclose when necessary to fulfill the official duties of such officer or employee.
31 USC 5321(a)(1) imposes a civil monetary penalty of not more than the greater of the amount involved in the transaction (not to exceed $100,000) or $25,000 against any person willfully violating the BSA, including willfully disclosing the existence of a SAR.
Each type of "financial institution" is defined in 31 USC sections 5312(a)(2) and (c)(1) and the underlying regulations. For suspicious transaction reporting requirements, each type of financial institution should refer to its specific portion of the regulations at 31 CFR Chapter X. Within each portion of these regulations, the prohibition against disclosure of the SAR or information that one had been prepared or filed is similarly applied to employees as well as the financial institution.
For example, a bank would refer to 31 CFR Part 1020, Subpart C, "Reports Required to be Made by Banks" . Section 1020.320 specifies bank reporting of suspicious transactions.
Casinos and Card Clubs refer to 31 CFR 1021.320.
Money Services Businesses refer to 31 CFR 1022.320.
In the context of litigation, FinCEN advises that a financial institution and its employees neither admit nor deny the existence of a SAR and not respond to any discovery request or subpoena for SAR information. See 31 CFR 1020.320(e) for banks; section 1021.320(e) for casinos; and section 1022.320(d) for money services businesses.
Both criminal and civil penalties have been applied to employees for violations of the prohibition against disclosure. 31 USC 5321.
A January 2011 press release from the FBI on the criminal conviction of a bank employee for unauthorized disclosure of a SAR to the subject of the SAR also noted that he appeared to be the first bank official in the nation to be convicted of criminal charges for revealing the filing and content of a SAR.
In December 2011, FinCEN issued an administrative assessment of a civil penalty of $25,000 against the bank employee based on the facts established in the criminal trial.
A major exception occurs when SAR information is sought by FinCEN, an appropriate regulator, or a law enforcement agency. This exception is set out in the regulations for banks at 31 CFR 1020.320(d), casinos at section 1021.320(d), and money services businesses at section 1022.320(d).
FinCEN guidance also allows a financial institution to disclose SAR information to its controlling company or head office.
FinCEN and the federal banking agencies take the position that banks’ internal controls for the filing of SARs should minimize the risks of disclosure.
There are other considerations regarding disclosure by government employees in addition to the disclosure rule of 5318(g)(2)(A)(ii). No current or former officer or employee of the Federal Government or of any state, local, tribal, or territorial government within the United States, who has any knowledge that such report was made, may disclose to any person involved in the transaction that the transaction has been reported, other than as necessary to fulfill the official duties of such officer or employee.
The Revised Re-Dissemination Guidelines reiterate the importance of safeguarding SARs. BSA information includes the information in a SAR, as well as discussions between officials of a financial institution and law enforcement concerning a SAR, if the disclosure of such information or discussions would reveal the existence of a SAR.
An IRS employee who is requested to provide SAR information in response to a Freedom of Information Act (FOIA) request or a summons, should be aware of the following:
BSA reports are exempt from FOIA requests, or similar requests under state and local open government rules. 31 USC 5319. This applies to SARs as well as other BSA reports.
SARs are generally protected from disclosure even in response to a court summons. See Whitney National Bank v. Karam 306 F.Supp.2d 678, S.D.Tex., February 20, 2004 (NO. CIV.A. H-02-2250). Exhibit 4.26.14-1, paragraph 8 of Letter Agreement.
The information contained in a SAR and even the existence of a SAR generally cannot be disclosed to parties involved in the transaction. See 31 USC 5318(g)(2)(ii).
As with the precautions required for informant information, the identity of persons who furnish information regarding suspicious activity must be protected. All employees must, therefore, handle such information in strict confidence. (See IRM 25.2, Information and Informants Rewards).
Seeking information underlying the filing of a SAR by contacting or issuing a summons to the individual or business entity that filed the SAR requires consultation with the SAR Coordinator and BSA FinCEN Liaison.
To avoid an indication that a SAR was filed, Compliance employees should not limit their summons requests to transactions mentioned specifically in a SAR. A summons should only be issued when there is no third-party notification requirement.
BSA information, when included in a Title 26 compliance case file, is subject to the section 6103 restrictions on disclosure of return information. Title 31 data obtained during the course of a tax examination or collection activity is "return information" for IRC 6103(b)(2) purposes.
Furthermore, when the SAR information is used in a Title 26 case it retains its character as information from a BSA report. If a FOIA request is made in the Title 26 case:
The existence of a SAR and/or SAR information is not to be disclosed. 31 USC 5319.
Disclosure guidance on SARs is posted at: http://mysbse.web.irs.gov/CLD/Disclosure/Office/Guidance/Dispatch/7503.aspx.
The examiner should contact the local Disclosure Officer for assistance.
The examiner should follow security procedures for safeguarding SAR information, including:
Attach Document TD F 15-05.11, Sensitive but Unclassified (SBU) Cover Sheet, catalog 56033J, to the outside of the file.
Keep all SARs and SAR information inside a sealed confidential envelope labeled "SAR Information."
The activity record or case history should not reveal that SARs and/or SAR information exists – substitute "confidential informant" when referring to a SAR.
If work papers or case histories need to detail information regarding SARs, the work papers or history documents should also be placed in the confidential envelope.
The operating divisions may add additional safeguards to this general list, including disposal or retention of SAR information when cases are closed.
SAR information may only be disseminated to the extent permitted under section 6103 of Title 26 and Appendix III, SAR Disclosure Guidance, of FinCEN’s Re-Dissemination Guidelines. The examiner must consult with management officials, the SAR Coordinator, and the BSA FinCEN Liaison when considering information-sharing and prior to taking any action.
If SAR information is sought in a tax case, both the protections of 31 USC 5319 and those of IRC 6103 apply.
The information contained in the SAR and the existence of the SAR itself cannot be disclosed.
Under both Title 26 and Title 31, there are criminal and civil penalties for unauthorized disclosure of SAR information.
In using SAR information, the examiner must be careful not to create an impression that a SAR may have been filed.
Users should first attempt to acquire additional information through a general Information Document Request (IDR) – because being specific might indicate that a SAR had been filed.
Seeking information underlying the filing of the SAR by contacting or issuing a summons to the person that filed the SAR requires consultation with the SAR coordinator and BSA FinCEN Liaison.
Examples of information underlying the filing of the SAR include a photocopy of the identification provided when the transaction occurred or the business’ video surveillance tapes.
SARs and SAR information must be treated the same way as information from a confidential informant.
Employees should neither lie to the taxpayer nor admit the existence of a SAR when dealing with a taxpayer. If asked by the taxpayer for the source of their information, the employee may reply: "I cannot disclose that information. The authority to withhold that information is in Internal Revenue Code Section 6103(e)(7)."
Potential unauthorized disclosures or loss of SAR data must be reported.
For guidance on whether an action is reportable, the SAR Coordinator should be contacted.
Within one hour of learning of a potential or actual loss or unauthorized disclosure of SAR data, the user must report the circumstances surrounding the incident to Computer Security Incident Report Center (CSIRC).
Within five workdays of the incident, a copy of the CSIRC report reflecting the control number assigned must be provided to the Chief, BSA Policy and Operations, or designee, through SAR Coordinator and management channels. The CSIRC report number must be included in this report.
The Chief, BSA Policy and Operations, is the IRS official responsible for informing FinCEN of potential or actual unauthorized disclosure or any potential or actual loss of SARs or SAR information by the agency. IRS is obligated to report potential unauthorized disclosures or loss of SAR data to FinCEN within 30 days.
Suspected browsing of SAR data is subject to unauthorized access (UNAX) rules and is reported to TIGTA. IRM 220.127.116.11.1.
Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business, was required only by 26 USC 6050I until the USA PATRIOT Act also required it under 31 USC 5331, effective January 1, 2002. Then, Form 8300 became a dual purpose form required under nearly the same circumstances by both code titles. Material differences between the two code provisions include the following:
From 2002 until 2012, clerks of court were only required to file Form 8300 under IRC 6050I(g) but not under 31 USC 5331. At the time of this writing in early 2012, the filing requirement for clerks of court is delayed until FinCEN has deployed its new BSA System of Record.
IRC 6050I(e) requires the filer to furnish an annual statement to the person required to be named in the Form 8300. See IRM 4.26.10. This provision has not been carried over to 31 USC 5331.
Penalties are different under the two code provisions.
Because the Form 8300 is required by two different titles, Title 26 and Title 31 of the USC, the access and disclosure rules are different under each title. The rules change depending on the date of the transaction and the method of access.
Prior to January 1, 2002, there was no filing requirement under Title 31. Any Form 8300 filed for a transaction that occurred before January 1, 2002, as required by IRC 6050I, is considered a tax return form and disclosure of information gathered via Form 8300, prior to January 1, 2002, is tax return information subject to IRC 6103 rules regarding disclosure.
A Form 8300 required to be filed for a transaction occurring after December 31, 2001, other than a Form 8300 required to be filed by a court clerk, meets a dual filing requirement under both IRC 6050I and 31 USC 5331. For Forms 8300 filed for a transaction occurring after December 31, 2001, there are different disclosure rules covering the release of the Form 8300 information, depending on whether the release is made under Title 26 or Title 31.
Information pertaining to Forms 8300 accessed from the IRS Master File, including Information Return Master File (IRMF), is subject to the provisions of 26 USC 6103(l)(15) and may be disclosed upon written request to officers and employees of any Federal agency, any agency of a state or local government, or any agency of the government of a foreign country.
Filed Forms 8300 that are not required to be filed by law (i.e., regarding a transaction less than $10,000 or reporting a transaction designated by the filer to be suspicious) are generally ineligible for disclosure under 26 USC 6103(l)(15). See IRM 18.104.22.168.8.1.
IRC 6103(l)(15) does not pertain to disclosures for the purpose of tax administration. Disclosure for purposes of tax administration is made under provisions of IRC 6103, including the related statute provisions. See the discussions of disclosures under IRC 6103 and the related statute determination in this section.
Disclosure for purposes of referral for grand jury investigation and for criminal tax prosecution, or under an ex-parte court order are also permitted under IRC 6103.
Forms 8300 and Form 8300 report information filed with the Enterprise Computing Center - Detroit for transactions made on or after January 1, 2002, excluding those reports that were made by clerks of court, and accessed from the Web Currency and Banking Retrieval System (WebCBRS) in a Title 31 case, is Title 31 information subject to BSA disclosure restrictions.
As a Title 31 form, it is exempt from release under the Freedom of Information Act (FOIA), 31 USC 5319. From December 2011 going forward, the prohibition on disclosure of all BSA information under the FOIA is extended to state open information laws as well.
FinCEN has issued Re-Dissemination Guidelines for the disclosure of all BSA forms. When the Form 8300 is considered as a Title 31 form, it is subject to FinCEN’s Re-Dissemination Guidelines.Exhibit 4.26.14-3. Because of this, the IRS examiner may not share WebCBRS printouts with the subject in a case conducted under Title 31.
Although Form 8300 is required under both the IRC and the BSA, IRS Form 8300 examination activities are usually conducted under Title 26. There is no prohibition against using IDRS when the Form 8300 examination is conducted under Title 26 because the examination is considered to be for tax administration purposes. If, however, the examination is only for compliance with the BSA, IDRS cannot be accessed. See the discussion on the related statute determination in this section.
Penalties for unauthorized access and disclosure may be asserted under Title 26 or Title 31.
These penalties differ between the titles.
In both titles, the degree of intent affects whether or not the penalties are civil or criminal.
Penalties for unauthorized access and disclosure in violation of IRC 6103 are set forth in IRC 7431 (civil) and IRC 7213 and 7213A (criminal). See a discussion of these penalties in IRM 11.3.1, Introduction to Disclosure.
IRC 7431 provides that disclosure rules are enforced by the injured taxpayer who can bring an action for civil damages.
If any officer or employee of the United States knowingly, or by reason of negligence, inspects or discloses any return or return information of a taxpayer in violation of any provision of IRC 6103, such taxpayer may bring a civil action for damages against the United States in a district court of the United States.
If any person who is not an officer or employee of the United States knowingly, or by reason of negligence, inspects or discloses any return or return information of a taxpayer in violation of any provision of section 6103 or in violation of section 6104(c), such taxpayer may bring a civil action for damages against such person in a district court of the United States.
Damages may amount to the greater of $1,000 for each disclosure or the sum of the actual damages plus appropriate punitive damages plus the costs of the action plus in some cases reasonable attorney’s fees.
The criminal penalties for disclosure of a return or return information under IRC 6103 are set out in IRC 7213. They include:
A fine not exceeding $5,000 or
Imprisonment of not more than 5 years, or both, together with the costs of prosecution, and
Dismissal from office for federal employees.
Penalties for disclosure of BSA information are found in 31 USC 5321, Civil Penalties.
Subsection (6)(A) imposes a penalty of not more than $500 for a negligent violation.
Subsection (6)(B) imposes an additional penalty of not more than $50,000 if a pattern of negligent violations can be shown.
31 USC 5321(a)(1) provides civil penalties for willful violations of the BSA or related regulations of not more than the greater of the amount (not to exceed $100,000) involved in the transaction (if any) or $25,000.
31 USC 5321(d) provides that a civil money penalty may be imposed under subsection (a) for any violation of this subchapter notwithstanding the fact that a criminal penalty is imposed for the same violation.
Criminal penalties for willful unauthorized access and disclosure in violation of the BSA are found in 31 USC 5322, Criminal Penalties.
Subsection 5322(a) provides a penalty of a fine of not more than $250,000 or imprisonment for not more than 5 years, or both, for criminally willful violations.
Subsection 5322(b) provides a higher penalty if the criminally willful violation occurred while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period. The person violating the BSA in this manner shall be fined not more than $500,000, imprisoned for not more than 10 years, or both.