4.26.8. Special Procedures

(1) The Department of the Treasury has primary responsibility for implementing and enforcing the BSA. The Secretary of the Treasury delegated the authority to administer the BSA to the Director, FinCEN. 31 CFR 1010.810(b)(8) delegates the responsibility to examine and assure compliance with the requirements of 31 CFR Chapter X, Financial Crimes Enforcement Network, Department of the Treasury, for certain entities to the IRS.

(2) 31 CFR 1010.810(b)(8) delegates authority to the Commissioner of Internal Revenue to examine all financial institutions, except brokers or dealers in securities, mutual funds, futures commission merchants, introducing brokers in commodities, and commodity trading advisors, not currently examined by Federal bank supervisory agencies for soundness and safety.

(3) FinCEN’s delegation of authority to conduct Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, examinations under Title 31 enables the IRS to share the results of such examination with FinCEN and other federal and state governmental agencies, without Title 26 disclosure issues. IRS retains penalty authority for all Form 8300 filing requirements. A Form 8300 filing requirement under a Title 31 Geographical Targeting Order would be addressed only under Title 31. Starting a nonfinancial trade or business examination under Title 31 and then converting the case to a Title 26 to assess penalties requires special procedures which are discussed in this chapter.

(4) 31 USC 5318(b), Limitations on Summons Power, limits the Secretary of the Treasury to act against a domestic financial institution or nonfinancial trade or business or to issue a summons for the purpose of determining compliance with the BSA.

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

(1) Reports to monitor the current year’s work plan, as well as specific programs, are generated from the Title 31 Non-Bank Financial Institution database. These reports provide Headquarters and Field Examination with timely and reliable information. There are a variety of reports designed to meet the needs of the group or function. Reports used to monitor examination processes include:

• Direct examination time.

• New examination starts.

• Examination closures.

• Average hours expended per case.

• No issue percentage.

• Closed case cycle time by workstream.

• Open case cycle time by workstream.

• Referrals to Examination.

• Referrals to Employment Tax.

• Referrals to CI.

• Number of surveyed cases.

• Workplan accomplishments.

(2) Periodic program reviews are conducted to:

• Assess the effectiveness of specific programs within Examination or across the organization.

• Determine if procedures are being followed.

• Validate policies and procedures.

• Identify and share best/proven practices.

(1) The following table is a list of acronyms, and their definitions, used in this IRM

(1) The following table lists terms, and their definitions:

(1) The following is a list of resources related to the information found in this IRM.

(1) A financial institution or nonfinancial trade or business may use Form 2848, Power of Attorney and Declaration of Representative, to authorize their representative to represent them before the IRS in an examination conducted under Title 31. The representative must be eligible to practice before the IRS (see listed categories on Part II of Form 2848).

(2) A Form 2848 used in a Title 31 examination should be completed as follows:

1. Part 1, item 1, Taxpayer Information–Provide the name and address of the subject of the Title 31 examination requesting the representation.

2. Part 1, item 2, Representative Information–Provide the required information of the recognized representative(s). A recognized representative is an individual authorized to represent persons before the IRS under Treasury Department Circular No. 230, Regulations Governing Practice before the Internal Revenue Service, (31 CFR Part 10, Practice before the Internal Revenue Service).

3. Part 1, item 3, Acts Authorized, in the column "Description of Matter" enter "Title 31 BSA Examination" if the examination is on a financial institution, enter "Title 31 Form 8300 Examination with AML Program requirements" if the examination is on a nonfinancial trade or business that has an anti-money laundering program requirement, or enter "Title 31 Form 8300 Examination" if the examination is on a nonfinancial trade or business and they have no anti-money laundering program requirement.

4. Part 1, item 3, Tax Form Number, for an examination on a financial institution enter "Not applicable" and for a Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business, examination enter "Form 8300".

5. Part 1, item 3, Year(s) or Period, if the exam period is a full calendar year, enter the year as YYYY, for example, 2018. If the exam period covers multiple years or a series of inclusive periods, including quarterly periods, list the beginning period and the ending period (use "through", "thru" or a hyphen); for example, "2017 thru 2018" or "2nd 2017 - 3rd 2018".

6. Part 1, line 4, the subject of the examination must check the "Specific Uses not Recorded on Centralized Authorization File (CAF)" box. The IRS’s CAF unit will only process a Form 2848 for tax related matters. The representative must mail or fax the Form 2848 or POA to the IRS office handling the examination or bring the original to the first meeting.

7. Part 1, item 5 – Follow the instructions on the form and complete, as appropriate.

8. Part 1, item 7 – The subject of the examination must sign and date.

(3) Part II, Declaration of Representative. The representative must complete and sign. The instructions may be used for assistance.

(4) A properly completed Form 2848 meets the requirements in the Statement of Procedural Rules found at 26 CFR 601.503(a), Requirements.

(5) When a related statute determination has been made linking a tax examination with a BSA examination, a Form 2848 should be used. Form 2848 Part 1, Item 3, Description of Matter, should reflect either income tax in the first column or Form 1040, U.S. Individual Income Tax Return, in the second column. When a related statute determination has been made linking a tax examination with an examination for FBAR compliance, examiners should refer to IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures.

(1) A general Power of Attorney (POA), valid under state law, may be accepted for any financial institution or nonfinancial trade or business examined under Title 31. The POA must meet the requirements in the Statement of Procedural Rules found at 26 CFR 601.503, Requirements of power of attorney, signatures, fiduciaries and Commissioner’s authority to substitute other requirements. Examiners must review the POA to ensure these requirements are met.

(2) The first requirement is that the POA must be valid under state law.

(3) The document must contain the essential elements required for representation before the IRS. The essential elements are set out in 26 CFR 601.503(a), Requirements. The elements to check for in the general power of attorney include:

1. Name and mailing address of the taxpayer.

2. Social Security Number or Employer Identification Number of the taxpayer.

3. Employee plan number (if applicable).

4. Name and mailing address of the recognized representative(s).

5. Description of the matter(s) for which representation is authorized which, if applicable, must include the type of tax involved; the Federal tax form number; the specific year(s)/period(s) involved; and in estate matters, decedent’s date of death.

6. A clear expression of the taxpayer’s intention concerning the scope of authority granted to the recognized representative(s).

(4) IRS will not accept a POA which fails to include the information required in (a) through (e) above as per 26 CFR 601.503(b)(3), Special provision. The representative may cure any defect by executing a Form 2848, Power of Attorney and Declaration of Representative, (on behalf of the financial institution or nonfinancial trade or business) which includes the missing information.

(1) The direct contact provisions of IRC 7521(b)(2), Right of consultation, and IRC 7521(c), Representatives holding power of attorney, require IRS employees to:

1. Stop an interview whenever a financial institution or a nonfinancial trade or business requests to consult with a representative.

2. Obtain their immediate supervisor’s approval to contact the financial institution or the nonfinancial trade or business instead of the representative if the representative is responsible for unreasonably delaying the completion of an examination or investigation.

(2) Group managers must ensure employees are properly following the direct contact provisions. Case and workload reviews must address direct contact issues. See IRM 5.1.23.5, Bypassing of Taxpayer's Representative, for a more detailed discussion of bypass criteria and procedures.

(1) A Form 2848, Power of Attorney and Declaration of Representative, or other POA is processed based on the type of examination.

1. A Form 2848 or other POA must be date stamped when received.

2. A Form 2848 or other POA received during a Title 26 examination is submitted to the CAF. The examiners must process the form following the "Where to File Chart" in the instructions. If the document is faxed, the original must be retained in the case file. If the original document is mailed to the CAF, a copy must be retained in the case file.

3. A Form 2848 or other POA received during a Title 31 examination, regardless of whether it is a financial institution or a nonfinancial trade or business, is not faxed or mailed to the CAF. IRS examiners must ensure the representative checked the box on line 4, "Specific Uses Not Recorded on Centralized Authorized File" of the Form 2848. The original Form 2848 is retained in the case file. For a POA, other than Form 2848, the original form must be retained in the case file.

(1) The examiner must prepare the summons by providing all information required on the form. To be enforceable, a summons must be prepared in sufficient detail to meet legal requirements. The summons shall provide:

1. Name, title, department or agency, address, and telephone number of the person before whom the appearance shall take place or to whom the records shall be produced.

2. Address, date, and time to which the person summoned must appear or where such person summoned must produce the records. The date and time must be reasonable. The address for complying with the summons must not exceed 500 miles from where the financial institution operates or conducts business in the United States. See 31 USC 5318(c)(1), Production at designated site.

3. If customer notice is required prior to obtaining the records, the date for appearance and or production of records must be a minimum of 15 days after the service of the summons. See IRM 4.26.8, Special Procedures.

4. Detailed description of the books, papers, records, or other date required to be produced.

5. Name, title, department or agency, address, and telephone number of the person issuing the summons.

6. Signature of the person issuing the summons.

(1) The BSA summons package must be reviewed prior to being issued.

(2) All summons packages, except the FBAR, are reviewed and approved by the SB/SE BSA Liaison to FinCEN prior to issuance.

(3) FBAR summonses are reviewed and approved by SB/SE Division’s local Counsel prior to issuance. (See IRM 4.26.17.5.3.1 , FBAR Title 31 Summons Approval).

(1) Any delegate of the Secretary authorized to issue a BSA summons, or any other person authorized by law to serve summonses or other process, is authorized to serve a BSA summons. See 31 CFR 1010.914 , Service of Summons, Delegation Order No. 25-13, IRM 1.2.52.14(9) , Delegated to:, and IRM 1.2.52.14(12) , Delegated to:, for a list the IRS officers and employees authorized to serve BSA summonses. The person summoned is given Part A of a BSA summons.

(2) Service of a BSA summons may be made upon any:

1. Person, by registered mail, return receipt requested, directed to the person summoned.

2. Natural person by personal delivery.

3. Other person by delivery to an officer, managing or general agent, or any other agent authorized to receive service of process.

(3) Instructions for the handling of the pages and parts of the BSA Summons are as follows:

1. Page 1, Original to be kept by issuing agency

2. Page 2, Certificate of Service of Summons

3. Page 3, Part A To be given to person summoned

4. Page 5, To accompany Part C or Part E

5. Customer Notice

6. Customer’s Motion to challenge Government’s Access to Financial Records in The United States District Court

7. Customer’s Sworn Statement for Filing a Challenge in the United States District Court

8. Part D, Certificate of Compliance with the right to Financial Privacy Act of 1978

9. Part E, Post Notice Following Court Ordered Delay

10. Part F, Notice That no Legal Proceedings are Contemplated

11. Part G, Certification for Transferring Records Obtained Pursuant to the Right to Financial Privacy Act of 1978

12. Part H, Notice of Transfer of Financial Records to Another Department or Agency

(4) Certificate of Service. The summons must contain a certificate of service to be signed by the server of the summons. It must be completed immediately after the service. The certificate of service provides proof of the actual service of the summons. The certificate of service signed by the person serving the summons is evidence of the facts it states during a hearing of an application for enforcement of the summons.

(1) Any person authorized to issue a Bank Secrecy Act summons, or any officer or employee of the Treasury Department who is designated by that person, may receive evidence and examine witnesses pursuant to the summons. See 31 CFR 1010.915(a) , Examination of witnesses and records.

(2) Any person authorized by law may administer any required oaths and affirmations. Testimony of any person may be taken under oath and shall be written down or transcribed if under oath. A transcript copy shall be given to a witness upon request, unless for good cause the person issuing the summons determines, under Title 5 USC 555, Ancillary matters, that a copy should not be provided, in which case the witness may only inspect the official transcript. See 31 CFR 1010.915(b) , Examination of witnesses and records.

(1) 31 CFR 1010.916, Enforcement of summons, allows any person authorized to issue a summons to request the appropriate U.S. Attorney’s office to enforce the summons in case of refusal to comply with a BSA summons. The request is made from the examiner through their group manager to the territory manager, who will notify the BSA Policy Program Manager. The territory manager indicates approval of the enforcement request by signing it. After approval by the territory manager, the examiner will forward the request through SB/SE Division Counsel to the U.S. Attorney, who may bring an action to compel compliance in any U.S. court within the jurisdiction in which:

1. The investigation that gave rise to the summons is or has been carried on;

2. The person summoned is a resident; or

3. The person summoned carries on business or may be found.

(2) When a referral is made for enforcement of a BSA summons, prompt notification must be made through the BSA Liaison to FinCEN’s Associate Director, Office of Regulatory Policy and Programs Division.

(3) Prepare requests for enforcement of a BSA summons using a memorandum report format, to include the following information:

• Name and full address of the person being summoned

• Summary of the pertinent facts in the investigation

• Exactly what the Service employee is seeking to obtain

• Relevancy of the records sought, including the relevancy of records pertaining to third parties

• Need or importance of such evidence to the success or completion of the investigation

• Statement of whether service of the summons has been made on a responsible corporate officer, and if not why

• Circumstances surrounding contacts with the person summoned, explaining the defense(s) claimed for refusing to comply with the summons, and the circumstances under which the person summoned

• Transcript (if recorded) or memorandum of interview of the questions asked to the person summoned and the person’s responses

• Description of any problems involving the imminent expiration of the statutes of limitation

• Statement as to any known criminal investigations by other federal agencies of the individual, and, in the case of a corporation, its officers or employees

• Statement as to any other known requests for summons or subpoena enforcement against the person or related parties

(4) The territory manager signs the memorandum and the request is routed back to the examiner who transmits the original and one copy of the summons through SB/SE Division Counsel to the U.S. Attorney’s office in which the venue lies.

(5) The court may issue an order requiring the person summoned to appear before the Secretary or delegate to produce documentation or to give testimony explaining how the documentation was compiled and maintained, and to pay the costs of the proceeding. Any failure to obey the order of the court may result in a contempt charge. All processes in any case under this section may be served in any judicial district in which such person is found.

(1) Under 31 CFR 1010.915(c) , Disclosure of summons, testimony, or records, delegates of the Secretary or other officer or employee of the Treasury Department may not:

1. Make public the name of any person to whom a summons has been issued under this chapter or release any information to the public concerning that person or the issuance of a summons prior to the time and date set for the appearance or production of records or

2. Disclose any testimony taken or material summoned (including the name of the witness) to anyone other than an officer or employee of the Treasury Department or of any component thereof.

(2) Exceptions to the disclosure prohibitions of 31 CFR 1010.915 :

1. Nothing precludes a delegate of the Secretary, or other officer or employee of the Treasury Department, from disclosing testimony taken, or material presented to obtain necessary information for investigative purposes relating to the performance of official duties, or to any officer or employee of the Department of Justice in connection with a possible violation of Federal law.

2. The Secretary or his delegate may authorize disclosure in writing.

3. Disclosure may otherwise be required by law.

(3) Disclosures must be approved by FinCEN, except as provided above. A written request for disclosure must be submitted to the Chief, BSA Examination who will forward the request to FinCEN through the BSA Liaison to FinCEN.

(1) The decision to refer a case to FinCEN will depend upon the facts and circumstances of each case. The general standard for a FinCEN referral is significant BSA violation(s) or AML program deficiencies. This, along with indications of willful blindness or recklessness, may warrant a referral to FinCEN.

(2) Willfulness blindness is established when an individual takes deliberate actions to avoid confirming a high probability of wrongdoing and [when he] can almost be said to have actually known the critical facts. Willful blindness can also be made when a person made a conscious effort to avoid learning about the reporting and recordkeeping requirements. The failure to learn of the BSA requirements, coupled with other factors, such as the efforts taken to conceal the existence of the transactions, may lead to a conclusion that the violation(s) was due to willful blindness.

(3) The reckless standard is met if the entity clearly ought to have known that currency transactions were not being reported or records were not being made and the entity was in a position to find out for certain very easily.

(4) In many situations there will not be direct evidence to establish willful blindness or recklessness; therefore, examiners will often need to establish these through circumstantial evidence.

(5) An examiner should consider the following factors in determining whether willful blindness or recklessness exists and whether violations should be formally referred to FinCEN:

1. Systemic AML program deficiencies such as a pattern of reckless disregard towards, or continued breakdown in, compliance with the AML program requirements of the BSA.

2. Systemic reporting violations such as, repeated failures to file CTRs or SARs, repeated failures to file timely, and repeated filing of incomplete or inaccurate CTRs or SARs. For example, testing of CTRs filed reveal error rates that exceed a certain percentage indicating a systemic breakdown.

3. Systemic failures to verify the identity of the transactors.

4. Systemic recordkeeping violations, such as repeated failures to verify and create a record at specific dollar thresholds.

5. Consistent failures to respond to regulatory actions. For example, multiple BSA examinations where the entity was cited for AML program deficiencies and they failed or refused to update their program.

6. Failure to register as a MSB for an extended period.

7. Flagrant indifference by the entity or aiding a customer in structuring a transaction to avoid a reporting requirement or suspected money laundering activity by a customer or the entity.

(6) Additional violations which may warrant a referral:

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

2. Frequency or reoccurrence of violations

3. Continuation of violations after the institution became aware of them and made no efforts to correct the deficiencies which led to the violations

4. Failure to cooperate with the IRS to correct the violation

5. Evidence of concealment of the violation

6. Evidence that financial institution insiders were participants in the currency transaction, or that their associates directly or indirectly benefited because of the violation

7. The practice of preparing but not filing CTRs or SARs

8. False recordkeeping entries

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

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

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

12. Inclusion of ineligible entities on the exemption list by credit union/bank under IRS jurisdiction in situations that would otherwise require that filings be made

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

(1) The Form 5104 , Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, narrative contains the following sections:

1. Title page.

2. Report Index.

3. Name, Doing Business As, Taxpayer Identification Number, Address, and Telephone Number of the entity.

4. List of personnel responsible for BSA compliance.

5. Financial services offered.

6. IRS personnel.

7. Executive Summary.

8. History.

9. Scope and depth of the civil examination.

10. Description of the entity's AML program, emphasis on key procedures which relate to each violation cited.

11. Results of the BSA Examination. The exact nature of the program deficiency(s) (internal controls, training, audit, designated personnel), along with the BSA reporting and or recordkeeping violations that resulted from AML program deficiencies. This will allow both the IRS and FinCEN to identify the root cause of the problem and facilitate corrective action. In egregious cases, this will also enable FinCEN to establish civil willfulness and proceed against an institution in an enforcement action for program-related and/or reporting violations, as appropriate for each reporting and recordkeeping violation.

12. Financial institution’s response to the examiner’s findings.

13. Compliance Ratio - for each requirement of the BSA. This includes each reporting and recordkeeping requirement along with accuracy and timeliness for each of these.

    Example: Statements to be included: The compliance ratio for CTRs is computed at 16% (7 filed CTRs divided by 42 required CTRs). 35 single transaction plus 7 aggregated transactions, total 42 required filings.  The compliance ratio for accurately filed returns is computed at 28%. (2 accurately filed CTRs divided by 7 CTRs filed).  The compliance ratio for recordkeeping on sales of money orders is 82%. (46 records made divided by 56 transactions.)

14. Collection Potential - A brief statement which reflects their economic position and consequently their ability to pay a potential civil monetary penalty.

15. Mitigating Factors – Information or evidence presented to the IRS regarding the violations or the circumstances behind the violations that show "reasonable cause" for their failure to comply or that FinCEN should be made aware of when considering a civil monetary penalty. A mitigating factor is any fact or circumstance that lessens the severity or culpability of the violations or the financial institution’s ability to comply with the law.

16. Aggravating Factors – Offers evidence of facts that merit a harsher closing other than solely the issuance of a Letter 1112, Title 31 Violation Notification Letter. The examiner does not recommend the type of enforcement action.

(2) In drafting the FinCEN referral narrative, it is important that the proper font, sentence and paragraph spacing, punctuation, grammar, and proper spacing for numbered and bulleted lists are followed. The narrative must follow the Federal Plain Language Guidelines. Specifically, the following must be adhered to:

1. Include only relevant information.

2. Include all critical information.

3. Use "AML program" instead of "compliance program".

4. Use "BSA examination" instead of "BSA compliance examination".

5. The preferable font is Arial with font size of 11 or 12.

6. Use six-point spacing between items in numbered or bulleted lists.

7. Use single blank line spacing between paragraphs.

8. Spell out the name of the month, unless within a table and space is a consideration.

9. Do not use contractions such as "don't", "can't", or others. Spell out the words "do not", "cannot".

10. Do not use ampersands (&) unless they are part of an entity's name.

11. When referring to multiple forms, do not use an apostrophe. For example, use "CTRs", not "CTR's".

12. Ensure the page numbers match to corresponding pages in the narrative on the Index; especially after edits and corrections are made.

13. Ensure that spell check is used.

14. Use a header. The information within the header is limited to the entity’s legal name and any "Doing Business As". Check the box for "different first page" so the header does not appear on the first page.

15. Ensure that the pages are numbered at the bottom of each page.

(1) The Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, can be downloaded at http://publish.no.irs.gov/catlg.htm.

(2) Items to consider in completing Form 5104 include:

1. Name of Referred Entity – Enter the legal name of the entity.

2. Doing Business As – Enter the name under which the entity is operating.

3. The Referred Entity is Subject to IRS Jurisdiction as a: - Check all BSA financial services offered.

4. Date Entity was First Notified that it was a Financial Institution Covered under 31 CFR Chapter X , Financial Crimes Enforcement Network, Department of the Treasury, - The most common notification date is the date the Letter 1052 , Bank Secrecy Act Requirements Notification Letter, was first issued. The Letter 1052 may be in a previous BSA Exam case file.

5. Date Closed – Refers to the date the previous BSA examination was closed, not the date of the current examination.

6. Signatures – Electronic signatures required.

(1) BSA Examination will designate a field staff person to be the BSA Field FinCEN Liaison. This liaison will be responsible for submission of the Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, package to FinCEN. The Liaison’s responsibilities / role is primarily administrative in nature. Examples of duties include:

• Electronically forwarding the Form 5104 Package to FinCEN,

• Coordinating examiner responses to FinCEN on questions related to the referral, and

• Creating and updating a log of all Form 5104 packages submitted to and closed by FinCEN.

(2) The examiner will discuss the findings with their group manager to ensure concurrence with the examiner’s recommendation that the violations and AML program deficiencies support a potential referral to FinCEN using Form 5104. It is the examiner’s responsibility to develop the examination and to prepare a professional, complete and technically accurate Form 5104 Package.

(3) The group manager will email their respective BSA Policy Technical Advisor/Program Analyst, with a "cc" to the BSA Policy Program Manager to request a "pre-recommendation" conference to discuss the facts, law, and supposition for making recommendations. The advisor/analyst may provide recommended exam steps if additional issue development is agreed upon.

(4) The examiner will follow the procedures in IRM 4.26.8.7 if there are indications of "willful blindness" or "recklessness" present and a FTA assistance is requested.

(5) The BSA Policy Technical Advisor/Program Analyst will assist with:

1. Answering technical questions or questions related to the BSA which the examiner is unable to answer after conducting reasonable research of the BSA regulations and other guidance issued by FinCEN.

2. Answering questions related to exam steps or procedures while conducting the examination after ascertaining no appropriate guidance could be found in the IRM, Interim Guidance Memos or pertinent job aides.

3. Contacting IRS District Counsel and/or FinCEN’s Liaison to IRS to facilitate any legal interpretation of the BSA.

(6) The Form 5104 package is completed when apparent violations warrant a referral to FinCEN for potential civil enforcement. The examiner will use the FinCEN Referral Process Training material and the Sample Form 5104 when preparing and assembling the Form 5104 Package. Both documents are available on the BSA SharePoint.

(7) The examiner will forward the completed Form 5104 Package and FinCEN Referral Lead Sheet, (#410-1.1), to their group manager. If edits are recommended, the group manager will return the case to the examiner.

(8) After the group manager reviews the final Form 5104 Package and concludes the referral is acceptable, the group manager will sign the Form 5104 and forward the Form 5104 Package to their territory manager.

(9) The territory manager will review the Form 5104 Package and will return the Form 5104 Package to the group manager if edits are recommended. The territory manager may seek BSA Policy Technical Advisor/Analyst assistance with questions while reviewing the package.

(10) The territory manager will forward the Form 5104 Package to the BSA Policy Program Manager who will assign it to a technical advisor/analyst. The technical advisor/analyst is responsible for performing a "material quality" review. The technical advisor/analyst is to ensure the Form 5104 Package does not contain any material misrepresentation of facts or improper legal conclusions.

1. Material misinterpretation of fact = factual statements that are not supportive of the conclusion reached.

2. Material misrepresentation of the law = a determined incorrect legal supposition that is not based on interpretation or opinion.

(11) BSA Policy will return the Form 5104 Package to the territory manager, along with any recommendations, within 10 business days of receipt.

(12) The territory manager will meet with the group manager to discuss BSA Policy recommendations. If necessary, the Form 5104 Package will be returned to the examiner for editing.

(13) The group manager will forward the final Form 5104 Package to their territory manager for submission to the BSA Field FinCEN Liaison. The BSA Field FinCEN Liaison will forward the final Form 5104 Package to FinCEN electronically and retain a record of the submission.

(1) Examiners do not inform the financial institution that a referral has been made to FinCEN.

(2) No oral or written communication should be given to the financial institution respecting whether the violations appear to have been willful.

(3) The examiner should not contact the financial institution concerning the examination unless requested to do so by FinCEN after the referral has been submitted.

(1) FinCEN may contact the examiner for additional information or documentation on referrals; however, the examiner should not contact FinCEN.

(2) If the financial institution contacts the examiner after FinCEN has contacted them regarding the referral, the examiner is to call the BSA Field FinCEN Liaison who will notify FinCEN that the entity has contacted the examiner. The examiner’s contact with the entity is limited to advising them to contact FinCEN directly.

(1) If it has not been adequately established that the violations were willful:

1. The FTA will so indicate in part 7 of Form 13639 , Fraudulent Intent Referral Memorandum (FIRM). In the Explanation part of Form 13639 , the FTA will provide a written explanation of the reason that further development of willfulness is not appropriate and include any recommendations with respect to civil penalties.

2. The examiner will then proceed with the BSA case under civil procedures, including issuance of Letter 1112, Title 31 Violation Notification Letter and preparation of Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, and referral of the BSA case to FinCEN for civil penalty consideration.

(2) If the FTA considers that additional examination is warranted:

1. The FTA will prepare a plan of action for establishing whether the violations were willful in the Explanation section of Form 13639 and return a copy of Form 13639 to the examiner through the examiner’s group manager.

2. The examiner and the FTA will work together following the examination plan.

3. If firm indications of willfulness are discovered after further examination, the examiner will immediately contact the FTA for guidance. Contact with CI should be coordinated through the FTA.

(3) After the additional examination steps outlined in the FTA's plan of action, the examiner, group manager and FTA will discuss the results and reach a conclusion regarding a criminal referral. The FTA may memorialize this conclusion on the initial Form 13639 or a second follow-up FIRM may be completed and stapled to the initial FIRM.

(4) The FTA will indicate in Part 6 of the FIRM (original or follow-up) the final referral recommendation (either that criminal investigation is recommended, or criminal investigation is not appropriate). The FTA will provide in the Explanation section the reason(s) why criminal referral is not appropriate or, if criminal referral is recommended, the FTA will detail in the Explanation section the firm indications (as may be evidenced by affirmative acts) of willfulness.

(1) The examiner may prepare a BSA - Prime Lead Memorandum when they determine that a referral to Criminal Investigation (CI) is not appropriate because the facts do not show violations which meet criminal/local criminal criteria requirements; however, the examiner believes CI may be interested in the facts. A fillable copy of the Prime Lead Memorandum is available on the BSA SharePoint.

1. The examiner prepares the BSA - Prime Lead Memorandum. Box 8 requires a list of all attachments. It is crucial that copies of all supporting evidence (cashed checks [front and back], money orders, wire transmission receipts, or a spreadsheet of all wires, and other similar records) are included with the memorandum. All supporting evidence must be scanned and included as an attachment to the memorandum.

2. The examiner emails the BSA – Prime Lead Memorandum and the file with all attachments to their manager for approval.

3. The group manager must approve the memorandum prior to emailing it to the appropriate FTA group manager. A copy is forwarded to the territory manager.

4. The FTA group manager will transmit the memorandum to the Special Agent in Charge at the appropriate CI Field Office. In addition, the FTA group manager will transmit a copy of the memorandum to Exam Case Selection (ECS) via the *SBSE BSA CI Notification mailbox.

5. ECS will assign a source code reflecting BSA as the source of the information.

(2) The FTA may suggest a BSA Prime Lead Memorandum to CI when they determine that a referral for criminal investigation is not appropriate. The examiner will complete the Prime Lead Memorandum as set out above.

(3) The examiner will issue the Letter 1112, Title 31 Violation Notification Letter, and follow the guidance on making a Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, referral to FinCEN, if appropriate.

(1) If firm indications (as may be evidenced by affirmative acts) of willful BSA violations exist and criminal criteria (criteria used by CI for case acceptance) are met, the FTA will:

1. Recommend preparation of Form 2797, Referral Report of Potential Fraud Cases, in Part 8 or the FIRM,

2. Indicate in the Explanation Section of the FIRM the firm indications (as may be indicated by affirmative acts) of willfulness that exist and that criminal criteria are met, and

3. Return a copy of the FIRM to the examiner through the examiner's group manager.

(2) The examiner will suspend all civil examination activity in most cases; however, the examiner and group manager should consider the Parallel Civil and Criminal Referral procedures found in IRM 4.26.8.6.5 if the statute of limitations is of concern, another regulatory authority has made a referral to FinCEN, or any unusual factors are known.

(3) The examiner’s manager will record the suspense on the BSA database by entering the date that the Form 2797 was sent to CI in the appropriate field.

(4) The responsibility for protecting the statute of limitation rests with the examiner and the group manager.

(5) The determination to allow the BSA statute of limitations to expire will be made at a decision meeting attended by CI, the FTA, the examiner and the examiner’s manager.

(1) When preparing Form 2797, Referral Report of Potential Fraud Cases, the examiner will use the most current version of Form 2797. If a related tax examination is ongoing and the tax case is also being referred for criminal investigation consideration, a joint referral will be prepared. Both the tax and BSA violation issues may be placed on one Form 2797. The examiner will follow the instructions attached to the form and insert BSA Violation in Item 2 (f).

(2) Forward the completed Form 2797 to the group manager, via secured messaging, for consideration. A copy of the form will be retained in the case file.

(3) The group manager will review the referral and approve it by entering their name and the date. The form will then be forwarded to the FTA, via secured messaging, for consideration.

(4) The FTA will review the referral and approve it by entering their name and the date. The FTA will also prepare a one-page narrative (used to describe additional facts and/or the willfulness development process). The form and narrative will then be forwarded to the FTA manager, via secured messaging, for consideration.

(5) The FTA manager will review the referral and approve it by entering their name and the date. The form and narrative are forwarded to the appropriate CI field office for consideration. The Fraud Policy Analyst will send a copy of the Form 2797 package to the BSA Liaison to FinCEN. Contact information is available on the BSA Policy SharePoint.

(6) Procedures thereafter are governed by the instructions for the Form 2797. A disposition conference will be held within thirty (30) workdays of receipt of the referral by the CI field office to discuss CI’s decision to accept or decline the referral. If the referral is declined, CI will provide a statement indicating the reason(s) for the declination.

(1) Prior to the disposition conference, it may be helpful for the participants to contact the SB/SE BSA Liaison to FinCEN and/or CI’s Liaison to FinCEN for assistance in determining whether parallel civil and criminal action may be appropriate.

(2) The disposition conference should include a discussion regarding the possibility of parallel civil and criminal actions. A civil monetary penalty may be imposed notwithstanding the fact that a criminal penalty is imposed with respect to the same violation. Parallel referrals may be desirable to protect the statute of limitations, where a referral to FinCEN has been made by another regulatory authority or for other reasons.

(3) If it is determined to have parallel civil and criminal actions, the fact should be noted in the Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, Referral Package.

(4) The Letter 1112, Title 31 Violation Notification Letter, will not be issued due to the criminal referral. The History section of the Form 5104 narrative must include the following statement, "A parallel criminal referral has been made to IRS Criminal Investigation, no Letter 1112 was issued to the entity".

(5) The CI Liaison to FinCEN will review the package for compatibility with CI needs before the civil referral package is considered by FinCEN. FinCEN will not receive the file for civil penalty action until this review is completed.

(6) If FinCEN reaches out asking for the status of the referral, the examiner should advise them to contact the CI Liaison to FinCEN.

(1) While all items should be completed fully and accurately, items marked with an asterisk (*) must be completed according to the following provision:

1. If the information for an item marked with an asterisk (*) is not known or not applicable, check the box unknown.

2. To indicate Total amount as unknown, check the box provided.

3. Non-asterisk fields should be left blank if the information is unknown or not applicable.

(2) IRS completed SARs field information includes:

1. Type of Financial Institution - Select "Other" in the first box and enter "IRS Filing" in the second box

2. Primary federal regulator- Select "Internal Revenue Service (IRS)"

3. Filer name- Enter "Internal Revenue Service (IRS)"

4. TIN - Enter - "521782822"

5. TIN type - Select "EIN"

6. Address - Enter "985 Michigan Avenue, CTR Operations Division, 4th Floor"

7. City - Enter "Detroit"

8. State - Select "MI"

9. Zip Code - Enter "48226"

10. Country - select "US"

11. Filing institution contact office – Leave blank, Detroit will enter the contact information

12. Filing institution contact phone number – Leave blank, Detroit will enter the contact phone number

(3) The examiners must complete the SAR narrative section following FinCEN’s guidance, Guidance on Preparing a Complete & Sufficient Suspicious Activity Report Narrative, which can be found on their website. The SAR narrative is critical. The care with which it is completed may determine if the described activity and its possible criminal nature are clearly understood by investigators. Provide a clear, complete, and chronological description of the activity, including what is unusual, irregular, or suspicious about the transaction(s). The description should cover the material indicated in Parts I, II and III, but the examiner needs to describe any other information that they believe is necessary to better enable investigators to understand the suspicious activity being reported.

(4) The examiner must include a statement at the beginning of the narrative as to why the IRS is filing the SAR.