Money Laundering and Foreign Bank Accounts

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By: Robert E. McKenzie ©2011

 

Money Laundering and BSA

1.10    IRS agents are now working with the Financial Crimes Enforcement Network (FinCEN ) seeking out money laundering and Bank Secrecy Act (BSA) violations. Over 500 agents have been reassigned to these duties. Many taxpayers have unwittingly run afoul of these money laundering and BSA laws.

 

Congress passed the Bank Secrecy Act in 1970 as the first laws to fight money laundering in theUnited States. The BSA requires businesses to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters. The documents filed by businesses under the BSA requirements are heavily used by law enforcement agencies, both domestic and international to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion or other unlawful activity. The Internal Revenue Service is a partner in the U.S. National Money Laundering Strategy. The IRS seeks to achieve a balance between enforcement of the money laundering laws and education.

 

Patriot Act

1.20    On October 26, 2001, the President signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 (Public Law 107-56).  Title III of the Act makes a number of amendments to the anti-money laundering provisions of the Bank Secrecy Act (BSA), which is codified in subchapter II of chapter 53 of title 31, United States Code.

 

These amendments are intended to provide additional tools to prevent, detect, and prosecute international money laundering and the financing of terrorism.  Section 352(a) of the Act, which became effective on April 24, 2002 amended section 5318(h) of the BSA.  As amended, section 5318(h) (1) requires financial institutions to establish anti-money laundering compliance programs. FinCEN promulgated an anti-money laundering compliance program requirement specifically applicable to money services businesses that became effective on July 24, 2002, and can be found at 31 CFR 103.125.

 

Foreign Bank Account Reports

1.30    Under the Bank Secrecy Act, U.S. residents or a person in and doing business in the United States must file a report with the U.S. Treasury if he or she has a financial account in a foreign country with a value exceeding $10,000 at any time during the calendar year. Taxpayers comply with this law by noting the account on their tax return and by filing Form 90-22.1, the Foreign Bank and Financial Account Report (FBAR). Willfully failing to file an FBAR report can be punished under both civil and criminal law.

 

Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.  The Bank Secrecy Act requires U.S. persons who own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account (person having a financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and an aggregate value of all foreign financial accounts exceeding $10,000 at any time during the calendar year) to file a Form TD F 90-22.1. The FBAR is not an income tax return and should not be mailed with any income tax returns. The FBAR must be mailed on or before June 30 of the following year; 2008 FBARs are due by June 30, 2009.  Civil penalties can and are being assessed for non-compliance.

 

Recent Revisions

1.35    Last summer, some IRS officials took an expansive view of the filing requirements, saying they might apply to foreigners doing business here, as well as manyU.S. investors in private-equity and hedge funds. Even people who only had signature power over foreign accounts were told they might need to file. But in March 2010, Treasury officials issued guidance that, at least for this year, lets these same groups off the hook. The rules will continue to apply to thousands of other account holders, however. In 2009 about 550,000 taxpayers filed the reports, an increase of nearly 60% over 2008.

 

Penalties

Violation

Civil Penalties

Criminal Penalties

Comments

Negligent Violation Up to $500 N/A 31 U.S.C.
§ 5321(a)(6)(A)
31 C.F.R. 103.57(h).
Non-Willful Violation Up to $10,000 for each negligent violation N/A 31 U.S.C. § 5321(a)(5)(B)
Pattern of Negligent Activity In addition to penalty under § 5321(a)(6)(A)
with respect to any such violation, not more than $50,000
N/A 31 U.S.C. 5321(a)(6)(B)
Willful – Failure to File FBAR or retain records of account Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. Up to $250,000 or 5 years or both 31 U.S.C. § 5321(a)(5)(C)
31 U.S.C. § 5322(a)
and 31 C.F.R. § 103.59(b) for criminal.
The penalty applies to allU.S. persons.
Willful – Failure to File FBAR or retain records of account while violating certain other laws Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. Up to $500,000 or 10 years or both 31 U.S.C. § 5322(b) and 31 C.F.R. § 103.59(c) for criminal
The penalty applies to allU.S. persons.
Knowingly and Willfully Filing False FBAR Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. $10,000 or 5 years or both 18 U.S.C. § 1001,
31 C.F.R. § 103.59(d) for criminal. The penalty applies to allU.S. persons.

 

Foreign Gifts

1.40    You must file Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if, during the current tax year, you treat the receipt of money or other property above certain amounts as a foreign gift or bequest.  Include on Form 3520:

 

Gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate); or

 

Gifts valued at more than $13,258 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships). You must aggregate gifts received from related parties.  For example, if you receive $60,000 from nonresident alien A and $50,000 from nonresident alien B, and you know or have reason to know they are related, you must report the gifts because the total is more than $100,000.  Report them in Part IV of Form 3520.  Treat gifts from foreign trusts as trust distributions you report in Part III of Form 3520.

 

Where to File Form 3520

Mail Form 3520 to the following address:

InternalRevenueServiceCenter

P.O. Box409101

Ogden,Utah84409

 

Penalties for Failure to File Form 3520

1.50    You may be penalized if you do not file your Form 3520 on time or if it is incomplete or inaccurate.  Generally, the penalty is 5% of the amount of the foreign gift for each month for which the failure to report continues (not to exceed a total of 25%).

 

Form 3520A

1.60    Form 3520-A is the annual information return of a foreign trust with at least oneU.S. owner. The form provides information about the foreign trust, itsU.S. beneficiaries, and anyU.S. person who is treated as an owner of any portion of the foreign trust.

 

Who Must File

1.70    A foreign trust with aU.S. owner must file Form 3520-A in order for theU.S. owner to satisfy its annual information reporting requirements under section 6048(b). Each U.S. person treated as an owner of any portion of a foreign trust under sections 671 through 679 is responsible for ensuring that the foreign trust files Form 3520-A and furnishes the required annual statements to its U.S. owners and U.S. beneficiaries.

 

When and Where To File

1.80    File a complete Form 3520-A  with the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409, by the 15th day of the 3rd month after the end of the trust’s tax year. Give copies of the Foreign Grantor Trust Owner Statement (page 3) and the Foreign Grantor Trust Beneficiary Statement (page 4) to theU.S. owners andU.S. beneficiaries by the 15th day of the 3rd month after the end of the trust’s tax year.

 

An extension of time to file Form 3520-A (including the statements on pages 3 and 4) may be granted. For details, see Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

 

Who Must Sign

1.90    If the return is filed by:

 

  • An individual or fiduciary, it must be signed and dated by that individual or fiduciary.

 

  • A partnership, it must be signed and dated by a general partner or limited liability company member.

 

  • A corporation, it must be signed and dated by the president, vice president, treasurer, assistant treasurer, chief accounting officer, or any other corporate officer (such as a tax officer) authorized to sign.

 

Penalties

1.100  The U.S. owner is subject to a penalty equal to 5% of the gross value of the portion of the trust’s assets treated as owned by the U.S. person at the close of that year if the foreign trust: (a) fails to file a timely Form 3520-A or (b) does not furnish all of the information required by section 6048(b) or includes incorrect information. See section 6677(b). Additional penalties may be imposed if noncompliance continues after the IRS mails a notice of failure to comply with required reporting. See section 6677(a).

 

Criminal penalties may be imposed under sections 7203, 7206, and 7207 for failure to file on time and for filing a false or fraudulent return.

 

UBS Criminal Charges

1.110  On February 18, 2009 UBS AG,Switzerland’s largest bank, entered into a deferred prosecution agreement on charges of conspiring to defraud theUnited States by impeding the Internal Revenue Service (IRS), the Justice Department announced today.

 

Providing Names

1.120  As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), agreed to provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business. Under the deferred prosecution agreement, UBS also agreed to expeditiously exit the business of providing banking services to United States clients with undeclared accounts. As part of the deferred prosecution agreement, UBS further agreed to pay $780 million in fines, penalties, interest and restitution.

 

Charges

1.130  A criminal information was unsealed that charged UBS with conspiring to defraud theUnited States by impeding the IRS. According to court documents, in 2000, after it purchased the brokerage firm Paine Webber, UBS voluntarily entered into an agreement with the IRS that required UBS to report to the IRS income and other identifying information for itsUnited States clients who heldUnited States securities in a UBS account. Court documents allege that the agreement also required UBS to withhold income taxes fromUnited States clients who directed investment activities in foreign securities from theUnited States. The information further asserts that, in order to evade those new reporting requirements, employees and managers within the cross-border business, with the knowledge of certain UBS executives, helpedUnited States taxpayers open new UBS accounts in the names of nominees and/or sham entities. According to court documents, the assets of the individual’s accounts were then transferred to the newly created accounts, as to which theU.S. taxpayer would not be identified as a beneficiary.

 

Bankers & Others Indicted and Sentenced

1.140  In November 2008, UBS executive Raoul Weil was indicted by a federal grand jury inFort Lauderdale and charged with conspiring to defraud theUnited States for his alleged role in overseeing theUnited States cross-border business. The district court recently declared him to be a fugitive.

 

In June 2008, former UBSprivatebanker Bradley Birkenfeld pleaded guilty to a charge of conspiring to defraud theUnited Statesfor similar conduct. Birkenfeld was sentenced on May 1, 2009 to over 40 months in prison.

 

Since 2009 several bankers from other foreign banks have also been charged. Multiple taxpayers with foreign bank accounts have been indicted and convicted as a result of the ongoing IRS investigation.

 

First Settlement Offer Unreported Offshore Income

1.150  On March 26, 2009 IRS Commissioner Doug Shulman announced what was in effect a settlement offer for those that voluntarily and timely disclose unreported offshore income. Those meeting the terms of the offer will have to pay back-taxes and interest for six years, and pay either an accuracy or delinquency penalty on all six years. They will also pay a penalty of 20% of the amount in the foreign bank accounts in the year with the highest aggregate account or asset value. In other words, 20% of the highest asset value of an account anytime in the past six years. However, those who come forward on a timely basis will not face criminal prosecution. The offer was only open until 10-31-09.  Over 16,000 taxpayers came forward during the program.

 

NEW OCVD

1.160  The IRS, February 8, 2011, announced a new 2011 Voluntary Disclosure Initiative (OVDI) for taxpayers to disclose their unreported offshore accounts. To participate in the OVDI, taxpayers were required to file or amend their tax returns and Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts (FBAR)) and pay all delinquent taxes, interest and penalties by September 9, 2011. The initiative covered tax years 2003 through 2010.

 

In exchange for participating in the OVDI, taxpayers with undisclosed offshore accounts  avoided  criminal prosecution for their unpaid taxes and were subject to significantly reduced penalties. [Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5).]

 

Penalties

1.170  Under the OVDI, taxpayers were subject to a 25 percent penalty on the highest aggregate account balance on their undisclosed account(s) between the 2003 and 2010. If the value of the undisclosed account(s) was less than $75,000 at all times during the tax years in question, the penalty was reduced to 12.5 percent. Moreover, in limited situations, a penalty of 5% may be imposed.

 

This was the second amnesty offer from the IRS for taxpayers with unreported income from offshore accounts. The first amnesty period ended on October 31, 2009, and produced roughly 15,000 disclosures to the IRS. Participants were subject to a 20 percent penalty rate covering a six-year window.

 

IRS Commissioner Shulman has described the 2011 OVDI as “the last, best chance for people to get back into the system.”

 

Eligibility

1.180  The OVDI was open to taxpayers, including individuals, corporations, partnerships and trusts. Taxpayers under examination or under criminal investigation, however, were ineligible to participate in the program.

 

Opt Out

1.185  In June the IRS announced changes to the program that allows taxpayers to opt out of the penalty regime after they have made a disclosure. Those who opt out and convince the IRS that their reporting failures were not willful will be given lower penalties. If a taxpayer opts out and the IRS finds that they were willful will face higher penalties of 50% of the highest account balance. Taxpayers should only opt out if they believe there are compelling facts to support a finding that they were not willful.

 

2011 Results

1.190  The 2011 program has generated an over 12,000 voluntary disclosures. All together from these efforts, taxpayers came forward and made 30,000 voluntary disclosures. The IRS is starting to work through the 2011 applications. The $500 million in payments so far from the 2011 program brings the total collected through the offshore programs to $2.7 billion.

 

Quiet Disclosures

1.195  Taxpayers that had made “quiet disclosures” by filing amended returns and paying related tax and interest for previously unreported offshore income without otherwise notifying the IRS were encouraged to participate in the OVDI. Taxpayers that make quiet disclosures without seeking the protection of the OVDI run the risk of being examined and potentially criminally prosecuted for all applicable years.

 

Deadline

1.200  The OVDI was available to taxpayers that came forward and complete all requirements on or before August 31, 2011. Therefore, taxpayers looking to take advantage of the amnesty period should act quickly as it likely will take some time to obtain the requisite documentation from offshore financial institutions and to prepare an accurate disclosure to the IRS.

 

Additional Requirements

1.210  As a condition to being accepted into the 2011 Offshore Voluntary Disclosure Initiative (2011 OVDI), applicants were provide the IRS the following for those tax years covered by the voluntary disclosure (generally 2003 through 2010, inclusive) on or before August 31, 2011.( because of the difficulty in securing records some taxpayers have been granted 90 day extensions)

 

Copies of previously filed original (and, if applicable, previously filed amended) federal income tax returns for tax years covered by the voluntary disclosure.

 

 

Complete and accurate amended federal income tax returns (for individuals, Form 1040X, or original Form 1040 if delinquent) for all tax years covered by the voluntary disclosure, with applicable schedules detailing the amount and type of previously unreported income from the account or entity (e.g., Schedule B for interest and dividends, Schedule D for capital gains and losses, Schedule E for income from partnerships, S corporations, estates or trusts).

 

Copy of taxpayer’s completed and signed Offshore Voluntary Disclosures Letter.

 

A check made out to the U.S. Treasury.  The check must include the amount of tax, interest, and accuracy-related penalty under IRC § 6662(a), and, if applicable, the failure to file and failure to pay penalties under IRC § 6651(a) (the suspension of interest provisions of IRC § 6404(g) do not apply to interest due in this initiative).  If you cannot pay the total amount of tax, interest, and penalties as described above, submit your proposed payment arrangement and a completed Collection Information Statement ( Form 433-A, Collection Information Statement for Wage Earners and Self-employed Individuals, or Form 433-B, Collection Information Statement for Businesses, as appropriate).

 

Completed Foreign Account or Asset Statement.

 

Completed penalty computation worksheet showing the applicant’s determination of the aggregate highest account balance of his/her undisclosed offshore accounts, fair market value of foreign assets, and penalty computation signed by the applicant and the applicant’s representative if the applicant is represented.

 

Properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties.

 

For those applicants disclosing offshore financial accounts with an aggregate highest account balance in any year of $1 million or more, completed Foreign Financial Institution Statements as appropriate.

 

Complete and accurate Form TD F 90.22-1, Report of Foreign Bank and Financial Accounts, for foreign accounts maintained during calendar years covered by the voluntary disclosure and/or copies of previously filed FBARs.

 

For those applicants disclosing offshore financial accounts with an aggregate highest account balance in any year of $500,000 or more: Copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure.  Explain any differences between the amounts reported on the account statements and the tax returns.

 

For those applicants disclosing offshore financial accounts with an aggregate highest account balance of less than $500,000: copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure must be available upon request.  

 

 

A statement identifying all offshore entities for the tax years covered by the voluntary disclosure, whether held directly or indirectly, and your ownership or control share of such entities.

 

When accounts or assets were held in the name of a foreign entity, complete and accurate amended (or original, if delinquent) information returns required to be filed, for all tax years covered by the voluntary disclosure.  If the applicant is requesting that the Service waive the information reporting requirement, the applicant must submit a completed and signed Statement on Dissolved Entities.

 

If the applicant is a decedent’s estate, or is an individual who participated in the failure to report the foreign account, foreign asset, or foreign entity in a required gift or estate tax return, either as executor or advisor, provide complete and accurate amended estate or gift tax returns (original estate or gift tax returns, if not previously filed) for tax years covered by the voluntary disclosure necessary to correct the underreporting of assets held in or transferred through undisclosed foreign accounts or foreign entities.

 

Returns involving Passive Foreign Investment Company (PFIC) issues.  A statement whether the amended returns involve PFIC issues during the tax years covered by the 2011 OVDI period, and if so, whether the applicant chooses to elect the alternative to the statutory PFIC computation that resolves PFIC issues on a basis that is consistent with the mark to market (MTM) methodology authorized in IRC § 1296 but does not require complete reconstruction of historical data.

 

HIRE Act

1.220  On March 18, 2010, the President signed the Hiring Incentives to Restore Employment Act of 2010 (the “HIRE Act”, P.L. 111-147) into law. In addition to incentives to encourage hiring and investment in business machinery and equipment, the HIRE Act provides the IRS with new administrative tools to detect, deter and discourage offshore tax abuses. These enforcement provisions continue the IRS offshore tax collection efforts that were widely publicized through the 2009 voluntary disclosure program and the case against UBS AG. As part of its revenue offset, the HIRE Act contains the text of the previously-introduced Foreign Account Tax Compliance Act (“FATCA”) that imposes major new withholding requirements on certain payments to foreign financial institutions and requires these institutions, as well as foreign trusts, and foreign corporations to provide information about theirU.S. account-holders, grantors, and owners, respectively. The statute’s withholding tax provisions have a delayed effective date to allow the Treasury Department to write implementing regulations and give financial institutions time to prepare, but other provisions are effective now or are in fact retroactive. Among its enforcement provisions the HIRE Act imposes:

 

A 30% withholding tax on certain payments to foreign financial institutions that maintainUnited Statesaccounts, if these banks decline to enter into an information reporting agreement. This provision is effective for payments under new obligations not currently outstanding as of December 31, 2012.

 

A 30% withholding tax, effective in 2013, on certain payments to any foreign entity with a 10% United States owner, if the entity fails to provide the United States owner’s name, address, and taxpayer identification number. The withholding tax also applies to payments to foreign entities that decline to state whether they have a substantialUnited Statesowner.

 

Penalties up to $50,000 forU.S.citizens with unreported foreign financial assets worth $50,000 or more    a penalty that would apply in addition to the Foreign Bank Account Reporting (“FBAR”) penalty. This provision is effective beginning in 2011.

 

A minimum penalty of $10,000, effective in 2010, for failure to report creating, making transfers to, or receiving distributions from a foreign trust.

 

An enhanced 40% accuracy-related penalty on tax understatements attributable to an undisclosed foreign financial asset that applies to taxable years beginning after the date of enactment; and

 

A six-year statute of limitations on tax understatements if the omitted amount is attributable to a foreign financial asset and exceeds $5,000. The new limitations period applies retroactively to all past-filed tax returns subject to audit and assessment by the IRS.

 

Foreign Trust Reporting Provisions

1.230  Previously, aU.S. person treated as the owner of any portion of a foreign trust under the grantor trust rules was only required to assure that the trust file a tax return and provide information to the IRS. Under the HIRE Act, a U.S. person who owns all or part of a foreign trust must not only assure that the trust meets its filing obligations, but must also provide a separate return containing information requested by the IRS about the trust, probably including information about trust investments. Written notice must also be provided to the IRS when any of the following reportable events occur: (1) the creation of a foreign trust by a U.S. person, (2) the transfer of any money or property to a foreign trust by a U.S. person, including a transfer due on death, and (3) the death of a citizen or resident of the U.S. if the decedent was treated as the owner of any portion of a foreign trust under the grantor trust rules or a portion of a foreign trust was included in the decedent’s gross estate. The persons responsible for reporting these events include (a) the grantor in the case of the creation of an inter vivos trust, (b) the transferor in the case of a reportable event that is the transfer of any money to a foreign trust by a U.S. person (other than due to death), and (c) the executor of the decedent’s estate in other cases. The new law includes a $10,000 minimum penalty for each failure to report a foreign trust transaction. The maximum penalty for failure to report a transfer to or distribution from a foreign trust is 35%, which can be increased by delinquency fees in $10,000 increments.

 

For example, under the grantor trust rules, aU.S. person who transfers property to a foreign trust is treated as the owner of the portion of the trust comprising the transferred property for any tax year in which there is aU.S. beneficiary of any portion of the trust. The IRS may automatically treat a foreign trust as having a U.S. beneficiary unless the transferor submits requested information about the transfer to the IRS, and demonstrates to the satisfaction of the IRS that under the terms of the trust, no part of the trust’s income or corpus may be paid or accumulated during the tax year to or for the benefit of a U.S. person. Loans made toU.S. persons at below-market rate are deemed to be payments of the trust income or corpus for the benefit of aU.S. person; and if the trust is terminated at any time during the tax year, no part of the income or corpus could be paid to or for the benefit of aU.S. person.

 

If the foreign trust is deemed to have aU.S.beneficiary, the transferor must submit a tax return to the IRS including any additional information requested by the IRS. Civil penalties starting at $10,000 will be imposed if any tax return required isn’t filed on time, doesn’t contain all the information required, or includes incorrect information. The penalty now is the greater of $10,000 or 35% of the gross reportable amount, and if the failure to file continues for more than 90 days after receipt of a notice of failure to file, an additional penalty of $10,000 for each 30 day period can be imposed. These new penalty amounts are effective immediately and they apply to all returns due in 2010.

 

Conclusion

1.240  Under the cost recovery provisions of the HIRE Act, the IRS now has significantly enhanced power to fight offshore tax evasion. With respect to offshore trusts, the IRS now requires far more information about these entities than ever before and has authority to impose more severe penalties on deliberate and inadvertent failures to comply with reporting rule

 

Money Services Business Registration Requirements

2.10    According to the January 2006, U.S. Money Laundering Threat Assessment report, many money services businesses (MSBs) are not registering with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) despite the fact that the law started requiring such registration in 2001. MSBs that fail to register, or to renew their registrations, may be subject to civil and criminal penalties under the Bank Secrecy Act.

 

Businesses that are considered MSBs for registration purposes are those that act in one or more of the following capacities: The term money services business includes:

 

  • Currency dealers or exchangers who exchange more than $1,000 for any one customer on any day.
  • Check cashers who cash checks totaling more than $1,000 for any one customer on any day.
  • Issuers of traveler’s checks, money orders or stored value who issue more than $1,000 in traveler’s checks, money orders or stored value for any one customer on any day.
  • Sellers of traveler’s checks, money orders or stored value who sell more than $1,000 in traveler’s checks, money orders or stored value for any one customer on any day.
  • Redeemers of traveler’s checks, money orders or stored value who redeem more than $1,000 in traveler’s checks, money orders or stored value for any one customer on any day.
  • Money transmitters.
  • U.S.Postal Service.

 

More Than $1,000

2.20    An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger; check casher; issuer of traveler’s checks, money orders or stored value; and seller or redeemer of travelers’ checks, money orders or stored value. The threshold applies separately to each activity — if the threshold is not met for the specific activity, the person engaged in that activity is not an MSB on the basis of that activity. No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

 

Notwithstanding the previous discussion, the term “money services business” does not include:

 

  • A bank, as that term is defined in 31 CFR 103.11(c), or
  • A person registered with, and regulated or examined by, the Securities and Exchange Commission or the Commodity Futures Trading Commission.

 

Renewal

2.30    After an MSB completes its initial registration, the form to renew its registration must be filed by December 31 of the second calendar year preceding the 24-month renewal period and is accomplished by filing the Registration of Money Services Business Form, FinCEN Form 107. Thereafter, registration renewal must be filed every 24 months by December 31.

 

Compliance Program

2.40    The anti-money laundering compliance program must be in writing and must be reasonably designed to prevent the money services business from being used to facilitate money laundering and the financing of terrorism.  At a minimum, the program must:

 

  • Incorporate policies, procedures and internal controls reasonably designed to assure compliance with the Bank Secrecy Act including:
  • Verifying customer identification
  • Filing reports
  • Detecting suspicious activity
  • Creating and retaining records; and
  • Responding to law enforcement requests
  • Designate a compliance officer to assure day-to-day compliance with the program.  The responsibilities of such person include assuring that:
  • The business properly files reports and creates and retains records;
  • The compliance program is updated as necessary to reflect current requirements and related guidance issued by the Department of Treasury; and
  • The business provides appropriate training and education.
  • Provide for ongoing training of appropriate personnel concerning their responsibilities under the program, including training in the detection of suspicious transactions.
  • Provide for an independent review to monitor and maintain an adequate program.
  • The scope and frequency of the review should be commensurate with the risk of the financial services provided by the money services business.  Such review may be conducted by an officer or employee of the MSB so long as the reviewer is not the person designated as the compliance officer.

 

In addition, 31 CFR 103.125(b) provides that compliance programs should be commensurate with the risks posed by the location and size of, and the nature and volume of financial services provided by, the money services business.

 

Civil Penalty

2.50    Any person who willfully fails to comply with the registration requirements may be liable for a civil penalty of up to $5,000 for each violation. Failure to comply includes the filing of false or materially incomplete information. Each day a violation continues constitutes a separate violation. In addition, the Secretary of the Treasury may bring a civil action to enjoin the violation.

 

Criminal Penalty

2.60    It is unlawful to do business without complying with the registration requirements. A criminal fine and/or imprisonment for up to 5 years may be imposed.

 

Filing FinCEN Form 107

2.70    MSBs should send completed FinCEN Forms 107 to theIRSDetroitComputingCenter to the attention of Money Services Business Registration atP.O. Box 33116,Detroit,Michigan 48232-0116.

 

Has Your Client  Implemented an Anti-Money Laundering Compliance Program?

2.80    TheUSA PATRIOT Act, passed In October 2001, amended the Bank Secrecy Act (BSA) to require all businesses defined in the BSA as financial institutions to implement an anti-money laundering (AML) program. Many of these businesses had not been subject previously to BSA regulation. So far, the entities that are subject to AML program requirements include: banks and other depository institutions (such as credit unions); securities broker dealers; casinos; money services businesses; mutual funds; operators of credit card systems; dealers in precious metals, precious stones, and jewels; and the insurance industry.

 

Patriot Act

2.90    In 2002, pursuant to Section 352 of the USA PATRIOT Act, FinCEN issued final regulations to require that all Money Services Businesses (MSBs) have an effective AML compliance program. This regulation (31 CFR 103.125) defines an effective program as one designed to prevent the MSB from being used to facilitate money laundering and the financing of terrorist activities. An MSB’s AML program must be commensurate with the risks posed by the location, size, nature and volume of the financial services provided by the MSB. Each MSB’s AML compliance program must be in writing and must have fully implemented it.

 

Form 8300

2.100  The general rule is that you must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions. The information provided by Form 8300 provides valuable information to the Internal Revenue Service (IRS) and the Financial Crimes Enforcement Network (FinCEN) in their efforts to combat money laundering. This is an important effort, since money laundering is a tool that assists many individuals who participate in various criminal activities, ranging from tax evasion to terrorist financing to drug dealing, to hide the proceeds from their illegal activities.

 

Filing Form 8300

2.110  If you are required to file Form 8300 for a transaction, you must do so by the 15th day after the date the cash transaction occurs. Meeting the proper filing requirements is very important, since there are potential civil and criminal penalties for failure to file Form 8300.

 

Who Must File Form 8300?

2.120  Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300.

 

For example, you may have to file Form 8300 if you are a dealer in jewelry, furniture, boats, aircraft, or automobiles; a pawnbroker; an attorney; a real estate broker; an insurance company; or a travel agency. Special rules for clerks of federal or state courts are discussed later under Bail received by court clerks.

 

Nor Related to Trade

2.130  However, you do not have to file Form 8300 if the transaction is not related to your trade or business. For example, if you own a jewelry store and sell your personal automobile for more than $10,000 in cash, you would not submit a Form 8300 for that transaction.

 

Transaction Defined.

2.140  A “transaction” occurs when:

 

  • Goods, services, or property are sold;
  • Property is rented;
  • Cash is exchanged for other cash;
  • A contribution is made to a trust or escrow account;
  • A loan is made or repaid; or
  • Cash is converted to a negotiable instrument, such as a check or a bond.

 

Person Defined

2.150  A “person” includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate.

 

 Exempt organizations, including employee plans, are also “persons.” However, exempt organizations do not have to file Form 8300 for a more-than-$10,000 charitable cash contribution they receive since it is not received in the course of a trade or business.

 

Foreign Transactions

2.160  You do not have to file Form 8300 if the entire transaction (including the receipt of cash) takes place outside of:

 

  • The 50 states,
  • TheDistrict of Columbia,
  • Puerto Rico, or
  • A possession or territory of theUnited States.

 

However, you must file Form 8300 if any part of the transaction (including the receipt of cash) occurs in Puerto Rico or a possession or territory of theUnited Statesand you are subject to the Internal Revenue Code.

 

Bail Received by Court Clerks

2.170  Any clerk of a federal or state court who receives more than $10,000 in cash as bail for an individual charged with any of the following criminal offenses must file Form 8300:

 

  • Any federal offense involving a controlled substance,
  • Racketeering,
  • Money laundering, and
  • Any state offense substantially similar to (1), (2), or (3) above.

 

What Payments Must Be Reported

2.180  You must file Form 8300 to report cash paid to you if it is:

 

Over $10,000,

 

Received as:

 

  • One lump sum of over $10,000,
  • Installment payments that cause the total cash received within 1 year of the initial payment to total more than $10,000, or
  • Other previously unreportable payments that cause the total cash received within a 12-month period to total more than $10,000,
  • Received in the course of your trade or business,
  • Received from the same buyer (or agent), and
  • Received in a single transaction or in related transactions

 

What Is Cash

2.190  Cash is:

 

  • The coins and currency of theUnited States(and any other country), and
  • A cashier’s check, bank draft, traveler’s check, or money order you receive, if it has a face amount of $10,000 or less and you receive it in:
  • A designated reporting transaction (defined later), or
  • Any transaction in which you know the payer is trying to avoid the reporting of the transaction on Form 8300.
  • Cash may include a cashier’s check even if it is called a “treasurer’s check” or “bank check.”

 

Cash does not include a check drawn on an individual’s personal account.

 

A cashier’s check, bank draft, traveler’s check, or money order with a face amount of more than $10,000 is not treated as cash. These items are not defined as cash and you do not have to file Form 8300 when you receive them because, if they were bought with currency, the bank or other financial institution that issued them must file a report on FinCEN Form 104.

 

Example 1.

You are a coin dealer. Bob Green buys gold coins from you for $13,200. He pays for them with $6,200 inU.S.currency and a cashier’s check having a face amount of $7,000. The cashier’s check is treated as cash. You have received more than $10,000 cash and must file Form 8300 for this transaction.

 

Example 2.

You are a retail jeweler. Mary North buys an item of jewelry from you for $12,000. She pays for it with a personal check payable to you in the amount of $9,600 and traveler’s checks totaling $2,400. Because the personal check is not treated as cash, you have not received more than $10,000 cash in the transaction. You do not have to file Form 8300.

 

Example 3.

You are a boat dealer. Emily Jones buys a boat from you for $16,500. She pays for it with a cashier’s check payable to you in the amount of $16,500. The cashier’s check is not treated as cash because its face amount is more than $10,000. You do not have to file Form 8300 for this transaction.

 

Designated Reporting Transaction

2.200  A designated reporting transaction is the retail sale of any of the following:

 

A consumer durable, such as an automobile or boat. A consumer durable is property, other than land or buildings, that:

 

  • Is suitable for personal use,
  • Can reasonably be expected to last at least 1 year under ordinary use,
  • Has a sales price of more than $10,000, and
  • Can be seen or touched (tangible property).

 

For example, a $20,000 car is a consumer durable, but a $20,000 dump truck or factory machine is not. The car is a consumer durable even if you sell it to a buyer who will use it in a business.

 

A collectible (for example, a work of art, rug, antique, metal, gem, stamp, or coin).

Travel or entertainment, if the total sales price of all items sold for the same trip or entertainment event in one transaction (or related transactions) is more than $10,000.

 

To figure the total sales price of all items sold for a trip or entertainment event, you include the sales price of items such as airfare, hotel rooms, and admission tickets.

 

Example.

You are a travel agent. Ed Johnson asks you to charter a passenger airplane to take a group to a sports event in another city. He also asks you to book hotel rooms and admission tickets for the group. In payment, he gives you two money orders, each for $6,000. You have received more than $10,000 cash in this designated reporting transaction. You must file Form 8300.

 

RetailSale  

2.210  The term “retail sale” means any sale made in the course of a trade or business that consists mainly of making sales to ultimate consumers.

 

Thus, if your business consists mainly of making sales to ultimate consumers, all sales you make in the course of that business are retail sales. This includes any sales of items that will be resold.

 

Broker or Intermediary

2.220  A designated reporting transaction includes the retail sale of items (1), (2), or (3) of the preceding list, even if the funds are received by a broker or other intermediary, rather than directly by the seller.

 

Exceptions to Definition of Cash

2.230  A cashier’s check, bank draft, traveler’s check, or money order you received in a designated reporting transaction is not treated as cash if one of the following exceptions applies.

 

Exception for Certain Bank Loans 

2.240  A cashier’s check, bank draft, traveler’s check, or money order is not treated as cash if it is the proceeds from a bank loan. As proof that it is from a bank loan, you may rely on a copy of the loan document, a written statement or lien instruction from the bank, or similar proof.

 

Example.

You are a car dealer. Mandy White buys a new car from you for $11,500. She pays you with $2,000 ofU.S.currency and a cashier’s check for $9,500 payable to you and her. You can tell that the cashier’s check is the proceeds of a bank loan because it includes instructions to you to have a lien put on the car as security for the loan. For this reason, the cashier’s check is not treated as cash. You do not have to file Form 8300 for the transaction.

 

Exception for Certain installment Sales

2.250  A cashier’s check, bank draft, traveler’s check, or money order is not treated as cash if it is received in payment on a promissory note or an installment sales contract (including a lease that is considered a sale for federal tax purposes). However, this exception applies only if:

 

  • You use similar notes or contracts in other sales to ultimate consumers in the ordinary course of your trade or business, and
  • The total payments for the sale that you receive on or before the 60th day after the sale are 50% or less of the purchase price.

 

Exception for Certain Down Payment Plans

2.260  A cashier’s check, bank draft, traveler’s check, or money order is not treated as cash if you received it in payment for a consumer durable or collectible, and all three of the following statements are true.

 

  • You receive it under a payment plan requiring:
  • One or more down payments, and
  • Payment of the rest of the purchase price by the date of sale.

 

You receive it more than 60 days before the date of sale.

 

You use payment plans with the same or substantially similar terms when selling to ultimate consumers in the ordinary course of your trade or business.

 

Exception for Travel and Entertainment  

2.270  A cashier’s check, bank draft, traveler’s check, or money order received for travel or entertainment is not treated as cash if all three of the following statements are true.

 

  • You receive it under a payment plan requiring:
  • One or more down payments, and
  • Payment of the rest of the purchase price by the earliest date that any travel or entertainment item (such as airfare) is furnished for the trip or entertainment event.

 

You receive it more than 60 days before the date on which the final payment is due.

 

You use payment plans with the same or substantially similar terms when selling to ultimate consumers in the ordinary course of your trade or business.

 

Taxpayer Identification Number (TIN)

2.280  You must furnish the correct TIN of the person or persons from whom you receive the cash. If the transaction is conducted on the behalf of another person or persons, you must furnish the TIN of that person or persons. If you do not know a person’s TIN, you have to ask for it. You may be subject to penalties for an incorrect or missing TIN.

 

Exception

2.290  A nonresident alien individual or a foreign organization does not have to have a TIN, and you do not have to furnish a TIN for them, if all the following are true.

 

  • The individual or organization does not have income effectively connected with the conduct of a trade or business in theUnited States, or an office or place of business or fiscal or paying agent in theUnited States, at any time during the year.
  • The individual or organization does not file a federal tax return.
  • In the case of a nonresident alien individual, the individual has not chosen to file a joint federal income tax return with a spouse who is aU.S.citizen or resident.

 

What Is a Related Transaction

2.300  Any transactions between a buyer (or an agent of the buyer) and a seller that occur within a 24-hour period are related transactions. If you receive over $10,000 in cash during two or more transactions with one buyer in a 24-hour period, you must treat the transactions as one transaction and report the payments on Form 8300.

 

For example, if you sell two products for $6,000 each to the same customer in 1 day and the customer pays you in cash, these are related transactions. Because they total $12,000 (more than $10,000), you must file Form 8300.

 

More Than 24 Hours Between Transactions

2.310  Transactions are related even if they are more than 24 hours apart if you know, or have reason to know, that each is one of a series of connected transactions.

 

For example, you are a travel agent. A client pays you $8,000 in cash for a trip. Two days later, the same client pays you $3,000 more in cash to include another person on the trip. These are related transactions, and you must file Form 8300 to report them.

 

What About Suspicious Transactions

2.320  If you receive $10,000 or less in cash, you may voluntarily file Form 8300 if the transaction appears to be suspicious.

 

A transaction is suspicious if it appears that a person is trying to cause you not to file Form 8300 or is trying to cause you to file a false or incomplete Form 8300, or if there is a sign of possible illegal activity.

 

When, Where, and What To File

2.330  The amount you receive and when you receive it determine when you must file. Generally, you must file Form 8300 within 15 days after receiving a payment. If the Form 8300 due date (the 15th or last day you can timely file the form) falls on a Saturday, Sunday, or legal holiday, it is delayed until the next day that is not a Saturday, Sunday, or legal holiday.

 

More Than One Payment

2.340  In some transactions, the buyer may arrange to pay you in cash installment payments. If the first payment is more than $10,000, you must file Form 8300 within 15 days. If the first payment is not more than $10,000, you must add the first payment and any later payments made within 1 year of the first payment. When the total cash payments are more than $10,000, you must file Form 8300 within 15 days.

 

After you file Form 8300, you must start a new count of cash payments received from that buyer. If you receive more than $10,000 in additional cash payments from that buyer within a 12-month period, you must file another Form 8300. You must file the form within 15 days of the payment that causes the additional payments to total more than $10,000.

 

If you are already required to file Form 8300 and you receive additional payments within the 15 days before you must file, you can report all the payments on one form.

 

Example.

On January 10, you receive a cash payment of $11,000. You receive additional cash payments on the same transaction of $4,000 on February 15, $5,000 on March 20, and $6,000 on May 12. By January 25, you must file a Form 8300 for the $11,000 payment. By May 27, you must file an additional Form 8300 for the additional payments that total $15,000.

 

SAR’s

2.350  Money services businesses and banks are required to report any transactions they deem as suspicious. The MSB’s file a Suspicious Activity Report  with theDetroitComputingCenter.

 

A transaction must be reported if the MSB knows, suspects or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part):

Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity, or is

 

  • Designed to evade the requirements of the Bank Secrecy Act, whether through structuring or other means, or
  • Serves no business or apparent lawful purpose, and the reporting business knows of no reasonable explanation for the transaction after examining all available facts.

 

Filing

2.360  A SAR must be filed using a SAR MSB form. MSBs have 30 days after becoming aware of a suspicious transaction to complete and file the form.

 

Retention

2.370  A copy of the filed form and supporting documentation must be retained for a period of five years from the date of filing.

 

Disclosure Prohibited

2.380  MSBs (including MSB employees) are prohibited from disclosing to a person involved in the transaction that a suspicious activity report has been filed. Further, each MSB (including each MSB employee) is protected from civil liability for any SAR filed by the MSB.

 

Examples

2.390  The author has had clients who came under scrutiny for the following activities:

 

  • The purchaser of a tavern was required to pay in cash. He went to his bank on multiple occasions over a period of weeks to secure cash in amounts of less than $10,000 in order to accumulate the purchase price.

 

  • An immigrant who did not fully trust banks accumulated cash of about $150,000 saving monies from cashing her pay checks. She purchased a condo and needed a cashier’s check for the closing.  She went to a bank and deposited $20,000 and was required to file a CTR. The teller told her that if she deposited less than $10,000 there would be no need to file a report. Over a period of days she deposited cash in smaller amounts sufficient to accumulate money to purchase her downpayment via cashier’s check.

 

  • During a divorce a man accumulated cash in an effort to secret it from his soon to ex-spouse. After the divorce he began depositing the money with a stock broker in amounts less than $10,000. The IRS issued a forfeiture notice to the man’s broker and has confiscated over $400,000. The client has filed a claim and faces extended litigation and a criminal investigation.

 

  • Client was a used car dealer who sold cars for cash amounts in excess of $10,000 and failed to file CTR’s. He was indicted and convicted of money laundering and the IRS has initiated forfeiture proceedings against all of his assets. He is currently in prison awaiting sentencing.

 

CBRS System Overview

2.400  The Currency and Banking Retrieval System (CBRS) is an on-line database that contains Bank Secrecy Act (BSA) information.   IRS field agents in Small Business Self Employed (SB/SE), and Criminal Investigations Divisions (CID) as well as Local, State and Federal law enforcement agencies (Customs, Justice, DEA, etc) access the database for research in tax cases, tracking money-laundering activities, investigative leads, intelligence for the tracking of currency flows, corroborating information, and probative evidence.  Federal Regulatory agencies (Federal Reserve, Securities and Exchange Commission, etc) also use CBRS for general examination, compliance and enforcement efforts.

 

State Information Sharing

2.410  The Internal Revenue Service announced in 2006 agreements with 33 states and Puerto Rico to begin sharing Bank Secrecy Act (BSA) information. The agreements will allow the IRS and the participating states to share information and leverage their resources to ensure that money services businesses (MSBs) are complying with their federal and state responsibilities to register with the government and report cash transactions and suspicious activities. This new agreement will help the federal and state governments leverage resources while attacking illegal money laundering.”

 

The IRS and participating states will share enforcement leads and coordinate their efforts to make sure they are doing all the Bank Secrecy Act examinations on MSBs as required by law without overlapping efforts. The agreements will also help the IRS and the states present a united compliance front to MSBs and their representatives.

 

States Participating

2.420  Along with Puerto Rico, the following states have signed partnership agreements with the IRS:Alabama,Alaska,Arizona,Arkansas,California,Connecticut,Georgia,Idaho,Illinois,Indiana,Kansas,Kentucky,Louisiana,Maine,Maryland,Massachusetts,Minnesota,Nebraska,New Jersey,New York,North Carolina,Ohio,Oregon,Pennsylvania,South Dakota,Tennessee,Texas,Utah,Vermont,Washington,West Virginia,Wisconsin andWyoming.

 

Colorado,Hawaii,Montana,New Hampshire,New MexicoandMontanacannot enter into these agreements with the IRS because either state law prohibits them from doing so or they do not regulate the industry.

 

Federal Statutes – Money Laundering – Internal Revenue Code

2.430  IRS has sole investigative jurisdiction for criminal violations of the Internal Revenue Code (IRC), Title 26 of the United States Code. The IRC, Section 61(a) defines gross income as “. . . all income from whatever source derived.” This has been held by the courts to include income earned from illegal activities such as drug trafficking, embezzlement, extortion, healthcare fraud, bankruptcy fraud and numerous other crimes. The primary criminal statutes include evasion of income tax, false income tax returns, and failure to file tax returns, among others.

 

Additionally, IRC, Section 6050 I, requires anyone involved in a trade or business, except financial institutions, to report currency received for goods or services in excess of $10,000 on a Form 8300. This requirement has created a significant impediment to the use of illicit profits by narcotics traffickers and others engaged in illegal activity for the purchase of luxury items such as vehicles, jewelry and boats. Financial institutions report similar information on a Currency Transaction Report.

 

Federal Statutes and Acts Passed by Congress

2.440  Title 31, USC Section 5331 – was passed in 2001 as a result of the USA Patriot Act and duplicates the reporting provisions of IRC, Section 6050I (Form 8300). Dual reporting of this information will now be made to both the IRS and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

 

Title 31 USC Section 5332 –Also as a result of the USA Patriot Act was the passage of Title 31 USC 5332, Bulk Cash Statute. Criminal Investigation has jurisdiction to investigate violations of this statute. This affects anyone who transports or attempts to transport currency or other monetary instruments of more than $10,000, from a place within the United States to a place outside of the United States, or from a place outside the United States to a place within the United States, and knowingly conceals it with the intent to evade the reporting requirements of 31 USC 5316.

 

Title 18 USC Section 1960 – IRS has the jurisdiction to investigate violations under Title 18 USC 1960 which requires Money Service Businesses to be registered with the Federal Government.

 

Bank Secrecy Act – The Currency and Foreign Transactions Reporting Act, Public Law No. 91-508, Title II, along with financial institution record-keeping requirements, became known as the Bank Secrecy Act (BSA). The BSA mandates the reporting of certain currency transactions conducted with a financial institution, (Form 4789), the disclosure of foreign bank accounts (TD F 90-22.1), and the reporting of the transportation of currency exceeding $10,000 acrossUnited Statesborders (Form 4790).

 

Money Laundering Control Act of 1986 – Criminal Investigation investigates and recommends criminal prosecution for violations of Title 18, USC, Sections 1956 and 1957. These statutes make it illegal to conduct certain financial transactions with proceeds generated through specified unlawful activities, such as narcotics trafficking, Medicare fraud and embezzlement, among others.

 

Asset Forfeiture – The asset forfeiture program is one of the federal government’s most effective tools against drug trafficking, money laundering, and organized crime. In conjunction with other federal, state, and local law enforcement agencies, Criminal Investigation uses asset forfeiture statutes to dismantle criminal enterprises by seizing and forfeiting their assets. Most of Criminal Investigation’s seizures and forfeitures are the result of Title 18 and Title 31 money laundering and currency investigations.

 

Money Laundering Investigations FY 2010 FY 2009

FY 2008

Investigations Initiated 1597 1341 1422
Prosecution Recommendations 1240 1048 1305
Indictments/Informations 1066 936 1200
Sentenced 751 753 686
Incarceration Rate* 83.8% 85.9% 84.7%
Average Months to Serve 69 72 67

 

Bank Secrecy Act (BSA) Investigations FY 2010

FY 2009

FY 2008

Investigations Initiated

738

624

518

Prosecution Recommendations

456

343

353

Indictments/Informations

380

289

326

Sentenced

299

335

332

Incarceration Rate*

73.9%

75.5%

75.9%

Average Months to Serve

38

39

42

 

 

 

Currency Reporting

 Report

 Requirements

 2008 

 Currency Transaction Report (CTR)  Filed by financial institutions that engage in a currency transaction in excess of $10,000

 15,449,549

 Currency Transaction Report Casino (CTRC) (Includes both Form 8362 & Form 8852)  Filed by a casino to report currency transactions in excess of $10,000.

 452,075

 Report of Foreign Bank and Financial Accounts (FBAR)  Filed by individuals to report a financial interest in or signatory authority over one or more accounts in foreign countries, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

 349,667

 IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business  Filed by persons engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions within a twelve month period.

 173,345

Suspicious Activity Report (SAR) Filed on transactions or attempted transactions involving at least $5,000 that the financial institution knows, suspects, or has reason to suspect the money was derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and financial reporting requirements (structuring)

733,543

 Suspicious Activity Report Casino (SARC)  Filed on transactions or attempted transactions if it is conducted or attempted by, at, or through a casino, and involves or aggregates at least $5,000 in funds or other assets, and the casino/card club knows, suspects, or has reason to suspect that the transactions or pattern of transactions involves funds derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and transaction reporting requirements (structuring).

11,162

Registration of Money Services Business (RMSB)  Each Money Services Business (MSB), except one that is a money services business solely because it serves as an agent of another MSB, must  register.

 21,263

 Suspicious Activity Report by Money Services Businesses  (SARM)  Filed on transactions or attempted transactions if it is conducted or attempted by, at, or through a MSB, involving or aggregating funds or other assets of at least $2,000 in funds or other assets, and the MSB knows, suspects, or has reason to suspect that the transactions or pattern of transactions involves funds derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and transaction reporting requirements (structuring) or when the transaction has no business or apparent lawful purpose and the MSB know of no reasonable explanation for the transaction after examining the available facts. When transactions are identified from a review of records of money orders or traveler’s checks that have been sold or processed, an issuer of money orders of traveler’s checks shall be required to report a transaction or a pattern of transactions that involves or aggregates funds or other assets of at least $5000.

 531,763

 Suspicious Activity Report by the Securities & Futures Industries  Filed on transactions, or attempted transactions, if it is conducted by, at, or through a broker-dealer, it involves aggregates funds or other assets of at least $5,000, and the broker-dealer knows, suspects, or has reason to suspect that the transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity.  Also filed when transactions are designed, whether through structuring or other means, to evade filing requirements.  Also filed when transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts.  Also filed when the transaction involves the use of the broker-dealer to facilitate criminal activity

15,105

Designation of Exempt Person  Used by bank or other depository institution to designate an eligible customer as an exempt person from currency transaction reporting rules.

 52,149

 

 

 

 

 

 

 

 

 

 

 

 

 

PORTIONS REPRINTED WITH PERMISSION OF

THOMSON WEST, INC. ®

 

FROM

REPRESENTATION BEFORE THE COLLECTION DIVISION OF THE IRS

 

BY

ROBERT E. McKENZIE

ARNSTEIN & LEHR

120 SOUTH RIVERSIDE PLAZA, SUITE 1200

CHICAGO, ILLINOIS 60656

(312) 876-7100

 

REMCKENZIE@ARNSTEIN.COM

http://www.mckenzielaw.com

 

2011

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