- 4.26.15 General Program
- 188.8.131.52 Overview
- 184.108.40.206 Required Filing Checks
- 220.127.116.11 Contacts with BSA Group Manager
- 18.104.22.168 FinCEN Query System (FCQ) Use in Title 26 Examinations
- 22.214.171.124 Examination of Information Reports from the BSA Program
- 126.96.36.199.1 Project Codes
- 188.8.131.52.2 General Audit Techniques
- 184.108.40.206.3 Examination of CI Referrals
- 220.127.116.11 Uncovering a BSA Violation in a Title 26 case
- 18.104.22.168.1 Form 8300 Violations Discovered in a Title 26 Case
- 22.214.171.124.2 BSA Violations (Other Than FBAR) Discovered in a Title 26 Case
- 126.96.36.199.3 FBAR Violations Discovered in a Title 26 Case
- Exhibit 4.26.15-1 Comparison of Form 8938 and FBAR Requirements
Part 4. Examining Process
Chapter 26. Bank Secrecy Act
Section 15. General Program
November 04, 2015
(1) This transmits revised text for IRM 4.26.15, Bank Secrecy Act, General Program.
(1) This revision is limited to editorial updates.
(2) Obsolete references to Web Currency and Banking Retrieval System (WebCBRS) were replaced with FinCEN Query System (FCQ).
(3) References to the Report of Foreign Bank and Financial Accounts (FBAR) were updated. The obsolete form number, TD F 90-22.1, was replaced with FinCEN Report 114.
(4) Other minor editorial corrections were made.
Barbara J. Fiebich
Director, Specialty Exam Policy and Quality
Small Business/Self Employed
This section discusses administrative procedures and audit techniques that should be used by the general program income tax examiner working a case related to money laundering.
The general program examiner should be aware of the information available on the FinCEN Query System (FCQ), as well as the basic filing requirements of both the Bank Secrecy Act (BSA) and IRC Section 6050I.
Examiners must also keep Title 31 (BSA) and Title 26 (IRC) activities separate.
Title 31 inquiries must not be made during a Title 26 activity. BSA reports are not part of the Required Filing Checks for an examiner conducting an income tax examination. Thus, for example, an examiner conducting an income tax examination of a bank should not inquire as to the bank's Title 31 responsibilities or activities.
The FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR), is not a required filing check because it is a Title 31 requirement. However Form 8938, Statement of Specified Foreign Financial Assets, is a required filing check. As Form 8938 contains some of the same information as the FBAR, a failure to correctly complete Form 8938 may indicate a possible FBAR violation. See IRM 188.8.131.52.3, FBAR Violations Discovered in a Title 26 Case, below.
Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, is part of the Required Filing Checks for an examiner conducting an income tax examination. See IRM 184.108.40.206.1, Form 8300 Violations Discovered in a Title 26 Case, below.
The local BSA group manager is the resource person for questions about BSA program policies and procedures.
A Title 31 matter discovered during an income tax examination cannot be disclosed, even to the local BSA group manager, until a related statute determination has been made. See IRM 220.127.116.11.2 and subsection 18.104.22.168.2, below.
FCQ information is useful in identifying cash activity that may not be accurately reported on the income tax return. In addition, it may lead the examiner to discover sources of unreported income, often derived from criminal activity. FCQ information is a "window" on the underground economy, with invaluable information not obtainable elsewhere.
Examiners should refer to IRM 4.26.4 for detailed information on FCQ.
Access to BSA information through FCQ for tax purposes is governed by the Memorandum of Understanding (MOU) between the Financial Crimes Enforcement Network (FinCEN) and IRS dated September 24, 2010. See IRM 4.26.14, Disclosure, Exhibit 4.26.14-2.
The MOU allows compliance employees electronic access to SAR information or the ability to receive SAR data when authorized by their operating division and business unit leaders.
SAR information requests are limited to active examination and collection cases and case-building activities.
Training on SAR information access and security is mandatory prior to any authorized access. For a full discussion of SAR access and security, see IRM 4.26.14. See also IRM 22.214.171.124.3, Examination of CI Referrals, below.
Access and use of FCQ data is subject to minimum managerial review of audit trails to ensure appropriate use of FCQ 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 FCQ activity.
Queries will be compared against open inventory for the same 30-day period or will be validated through other business controls (e.g. gatekeeper procedures) to ensure queries were related to assigned cases.
A required second-level review would normally be conducted during an operational review.
A by-product of the BSA program is that information about the financial transactions of businesses and individuals obtained during the course of a BSA examination may have material Title 26 compliance potential.
The BSA examination program generates leads from sources such as:
BSA and Form 8300 examinations
Criminal Investigation referrals
The Enterprise Computing Center - Detroit.
These information leads are forwarded to the field for possible income tax examinations on Form 5346, Examination Information Report or Form 3949, Criminal Investigation Information Item.
The BSA examiner must not be assigned to the income tax examination.
Income tax examinations resulting from the BSA program are assigned the following project codes:
432 — leads from the Form 8300 program
441 — leads from the Title 31 program
If fraud is discovered as part of an income tax examination and the case is updated to status 17, the project code should be changed to reflect the fraud issue:
From 432 to 146 - Form 8300 fraud
From 441 to 147 - Title 31 fraud
The examiner should ensure that multiple years and any related return pick-ups also reflect the appropriate BSA project codes.
If, in the course of a BSA examination, the examiner identifies individuals and/or businesses conducting questionable transactions in currency and/or monetary instruments that indicate possible tax violations, a referral for a tax examination may be appropriate. No related statute determination is necessary to transmit Title 31 information for Title 26 action.
An income tax examination based on a referral from a BSA examination is conducted in accordance with established procedures for income tax examinations.
A referral received by a compliance function from Criminal Investigation (CI) may be derived from information filed by financial institutions on SARs. These reports are confidential and the information must be protected from unauthorized disclosure.
Because disclosure of SAR information is restricted by Section 5318(g) of Title 31, the examiner must not:
Disclose that a SAR report has been filed,
Propose an adjustment based solely on an amount listed on a Criminal Investigation Information Item (Form 3949),
Disclose a source or possible source of the information,
Conduct the examination in a manner in which the taxpayer could reasonably conclude any of the above, or
Issue a summons for specific SAR information.
If during the course of an examination, a request is received to identify the source of and/or the information that caused the examination to begin, the examiner should not reveal SAR information or the fact that a SAR was filed. The suggested response is "I cannot disclose that information. The authority to withhold that information is in Internal Revenue Code Section 6103(e)(7)."
A potential BSA violation may be discovered during the course of conducting an income tax compliance activity.
The examiner may not pursue or develop a BSA violation under the guise of a Title 26 compliance activity.
For guidance on protecting return information from a prohibited disclosure, see IRM 4.26.14.
Form 8300 is a dual-purpose form. It satisfies filing requirements under both Title 26 (IRC 6050I) and Title 31 (31 CFR 1010.350).
Form 8300 is part of the Title 26 Required Filing Checks.
When Form 8300 violations are discovered or suspected in a Title 26 case, the Title 26 examiner may examine the taxpayer's Form 8300 compliance under Title 26 without violating Title 26 disclosure rules.
However, BSA examiners have expertise in conducting Form 8300 examinations. The Title 26 examiner, with management concurrence, may refer the Form 8300 issues to BSA for a Form 8300 examination. A Form 5346,Examination Information Report, must be prepared and sent to BSA Workload Identification, Selection, Delivery, and Monitoring (WISDM) for consideration of a Form 8300 examination.
Title 31 is not part of the Title 26 Required Filing Checks.
BSA compliance cannot be examined during a Title 26 examination unless a Related Statute Determination (RSD) has been made. See IRM 126.96.36.199.2.
Title 26 tax examiners or revenue officers cannot refer discovered or suspected BSA violations unless an RSD has been made. See IRM 188.8.131.52.2.
Special considerations apply to FBAR violations.
Foreign accounts are commonly discovered during a Title 26 tax case. Examiners can consult FCQ to verify if the taxpayer filed an FBAR.
Foreign assets or accounts may also trigger a Form 8938 filing requirement. Form 8938 is a Title 26 requirement, not a BSA requirement. See the table in Exhibit 4.26.15-1 for a comparison of Form 8938 and FBAR filing requirements.
BSA does not accept referrals for FBAR examinations. Each operating division is responsible for examining its own FBAR cases. The case examiner who discovers the suspected FBAR violation has the greatest knowledge of the facts of the case and is expected to address the FBAR issue.
The Title 26 taxpayer cannot be examined for suspected FBAR violations unless an RSD has been made. The taxpayer should not be questioned regarding FBAR compliance until the RSD is made. See IRM 184.108.40.206.
For assistance in working FBAR cases, see IRM 4.26.16 for FBAR law and 4.26.17 for FBAR procedures.