September 11, 2015
Investigating financial crimes, part 1: What is the IRS role?
Financial crimes such as fraud, money laundering or violations of the Bank Secrecy Act do not necessarily relate directly to tax law. Why then is the Criminal Investigation division of the IRS involved in enforcing these laws?
In this two-part post, we will address that question. In part one, we will take note of some of the key responsibilities of the Criminal Investigation (CI) division. In part two, we will look specifically at the IRS’s role in money laundering investigations.
The IRS offers a rationale for the involvement of the CI division in enforcing laws against money laundering and other financial crimes. Because all income is theoretically taxable, the argument goes, illegally obtained income is taxable. To the IRS, this means that detecting efforts to hide income can be a key part of proving other criminal allegations.
In addition to money laundering, these other allegations can include violations of the Bank Secrecy Act, fraud and other financial crimes. Congress has tasked the IRS with various enforcement resonsibilites in these areas.
In practice, of course, allegations of money laundering and tax evasion may essentially be additional bargaining chips in a multi-count indictment brought by federal prosecutors.
An example of such a multi-count indictment is the case authorities are trying to build against the elected state auditor of Washington state. Prosecutors made a new indictment in the case last week, adding tax evasion and money laundering to an already lengthy list of accusations.
The charges against the auditor concern his handling of certain transactions at a private company he operated before taking office.
In part two of this post, we will look in more detail at federal money-laundering rules and the IRS’s role in enforcing them.