4.26.1. Introduction and Program Structure

(1) The mission of the BSA Program is to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity by providing the financial community top quality service to help them understand their obligations under the BSA and to ensure BSA compliance with integrity and fairness to all.

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

1. 31 USC 5318(a), General Powers of Secretary, provides the Secretary of the Treasury with authority to administer provisions of the BSA.

2. 31 CFR 1010.810(b)(8), Enforcement, gives the Commissioner, IRS, the delegated authority to examine certain financial institutions to determine compliance with BSA requirements. See Exhibit 4.26.1-1.

3. A Memorandum of Agreement dated April 8, 2003 delegates examination and penalty authority for Foreign Bank Account Reports (FBARs) from the Financial Crimes Enforcement Network (FinCEN) to the IRS. See Exhibit 4.26.1-2.

4. A Memorandum of Understanding and Delegation of Authority to Examine Non-Financial Trades and Businesses, dated April 10, 2015, delegates examination authority under Title 31 for Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, from FinCEN to the IRS. See Exhibit 4.26.1-3.

5. Related authority: IRC 7601, Canvass of districts for taxable persons and objects, authorizes the Secretary of the Treasury to inquire into taxpayers’ tax liability. IRC 7602, Examination of books and witnesses, authorizes the Secretary to examine books and witnesses for specific purposes including determining and collecting federal tax liabilities.

(1) Director, Examination - Specialty Policy is the executive responsible for BSA Examination policy and procedures.

(2) Director, Examination - Specialty Examination is the executive responsible for BSA examination operational compliance.

(3) Chief, BSA Exam is responsible for ensuring general information about basic BSA examiner responsibilities and IRM sections is communicated to and carried out by BSA examiners.

(1) The following table contains acronyms, used in this IRM, and the definition of each.

(2) See IRM 4.26.10, Bank Secrecy Act, Form 8300 History and Law, for general terms.

(1) The IRS adopted the Taxpayer Bill of Rights in June 2014. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of duties in accord with taxpayer rights. For additional information about the Taxpayer Bill of Rights see http://irweb.irs.gov/AboutIRS/tbor/default.aspx.

(2) Helpful information sources include:

• The BSA Policy SharePoint site

• A list of SB/SE BSA Policy Analysts, their contact information and program assignments, are found on the BSA Policy SharePoint

• FinCEN - Financial Crimes Enforcement Network

• 31 CFR Chapter X, Financial Crimes Enforcement Network, Department of the Treasury

• 31 USC 5311, Declaration of Purpose, et seq (Title 31)

• IRC 6050I, Returns relating to cash received in trade or business, etc. (Title 26)

• IRC 6721, Failure to file correct information returns

• IRC 6722, Failure to furnish correct payee statements

(3) The BSA program is required to follow all servicewide examination procedures and those set forth in the SBSE examining process IRM. However, the following material provides additional information relating to the processing and examination of Bank Secrecy Act program returns:

• IRM 4.26.3 - Examination Case Selection (ECS)

• IRM 4.26.4 - FinCEN Query (FCQ)

• IRM 4.26.5 - Bank Secrecy Act History and Law

• IRM 4.26.6 - Bank Secrecy Act Examiner Responsibilities

• IRM 4.26.7 - Bank Secrecy Act Penalties

• IRM 4.26.8 - Special Procedures

• IRM 4.26.9 - Examination Techniques For Bank Secrecy Act Industries

• IRM 4.26.10 - Form 8300 History and Law

• IRM 4.26.11 - BSA Examiner Responsibilities for Form 8300 Examinations

• IRM 4.26.12 - Examination Techniques for Form 8300 Industries

• IRM 4.26.13 - Structuring

• IRM 4.26.14 - Disclosure

• IRM 4.26.15 - General Program

• IRM 4.26.16 - Report of Foreign Bank and Financial Accounts (FBAR)

• IRM 4.26.17 - Report of Foreign Bank and Financial Accounts (FBAR) Procedures

(1) Money laundering is the process of converting funds from illegal activities to conceal their origin, true nature, or ownership into funds that appear to have a legal source. See generally 31 CFR 5340(2)(B), Money laundering and related financial crime.

(2) Once money becomes "dirty", it must be converted into a legitimate form before it can be spent. Money is laundered using a three-step process:

1. Placement is the physical movement of cash or cash equivalents derived from illegal or illicit activities and its introduction into traditional or nontraditional financial institutions, into the retail economy, or into foreign countries (for example, smuggling). The goal of the launderer is to move cash from its source and transform it to another asset without being detected. The cash is vulnerable to detection and seizure during the placement stage.

2. Layering is conducting multiple complex financial transactions to make it difficult to trace the proceeds from illegal or illicit sources. Layering disguises or eliminates the audit trail of the funds. The purpose of layering is to hide the audit trail as well as the source and ownership of funds.

3. Integration is the introduction of funds derived from illegal or illicit activities back into the economy with the appearance of normal business earnings or providing a seemingly legitimate explanation for financial wealth. It is extremely difficult to distinguish between legitimate and illicit or illegal funds at this stage.

(1) AML statutes are found in two separate titles of the USC:

• 31 CFR 5311, Declaration of purpose, (Title 31), excluding Section 5315, commonly referred to as the Bank Secrecy Act, and

• IRC 6050I, Returns relating to cash received in trade or business, (Title 26).

(1) IRS training materials include:

• Title 31 Training

• Form 8300 Training

• Casino Training for BSA Examiners

• Insurance Training for BSA Examiners

• Centralized Examination Training

• On-the-Job-Instructor Training

• Dealers in Precious Metal, Precious Stones, and Jewels Training for BSA Examiners

• Credit Union Training for BSA Examiners

• Prepaid Access Training

• BSA Unit II Training

• BSA Functional Managers Training

(1) The IRS SB/SE BSA Examination website, http://mysbse.web.irs.gov/examination/specialty/ctrcompliance/default.aspx, provides information about the operation and administration of the BSA Program.

(2) The IRS SB/SE BSA Policy SharePoint website, https://organization.ds.irsnet.gov/sites/SbseFraudBSA/BkSecAct/SitePages/Home.aspx, is accessible by BSA personnel only.

(3) The IRS Criminal Investigation website is https://portal.ds.irsnet.gov/sites/CIWeb/Pages/default.aspx.

(4) For information on issues related to tribal entities, the TEGE Indian Tribal Governments website is http://tege.web.irs.gov/job/itgteb/home.asp.

(5) The U.S. Department of the Treasury, FinCEN website is https://www.fincen.gov/.

(6) The U.S. Department of the Treasury, OFAC website is http://www.treas.gov/offices/enforcement/ofac/.

(7) FATF is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing: http://www.fatf-gafi.org/.

(1) Other BSA publications include:

• GAO reports relating to BSA are available at http://www.gao.gov/. Search the website using "BSA" or "AML".

• FinCEN publications are available on its website at http://www.fincen.gov.

• TIGTA reports relating to BSA are available at http://www.treas.gov/tigta/. Search the website using "BSA" or "AML".

(1) Commercial sources include:

• Research services, for example, CCH, Lexis-Nexis, and Westlaw

• Trade association publications, for example, Money Laundering Alert, National Money Transmitters Association, Association of Certified Anti-Money Laundering Specialists, Financial Intelligence Units - Egmont, etc.