Structuring and Money Laundering: What to Know During an IRS CI Investigation

IRS Criminal Investigation (IRS CI) doesn’t just target taxpayers for tax crimes. It also conducts investigations focused on uncovering the evidence needed to prosecute financial crimes and a wide range of other federal criminal offenses as well. These include the offenses of structuring and money laundering. Both of these offenses carry substantial penalties under federal law, and for individuals targeted in structuring and money laundering investigations, effective representation by an experienced Texas criminal tax lawyer is essential.

What Constitutes “Structuring” Under Federal Law?

“Structuring” is the term that federal authorities use to describe the practice of making bank deposits or withdrawals of less than $10,000 in order to evade the federal transaction reporting requirements. Under the Bank Secrecy Act (BSA), financial institutions are required to report cash transactions of $10,000 or more to the federal government using Currency Transaction Reports (CTRs).

The BSA’s cash transaction reporting requirement is intended to help prevent—and uncover—illicit money laundering transactions. As a result, structuring is also a criminal offense under federal law (31 U.S.C. Section 5324), and convictions can carry fines of up to $500,000 for individuals or $1 million for organizations, plus up to 10 years of federal imprisonment.

What Constitutes Money Laundering Under Federal Law?

Money laundering involves attempting to conceal the source of funds derived from illicit activities. While structuring is one form of money laundering, money laundering can take many other forms as well. In modern times, money laundering schemes are often highly sophisticated, involving multiple business entities and bank accounts around the world.

In all cases, money laundering is a serious federal offense. Under 18 U.S.C. Section 1956, money laundering convictions carry fines of up to $500,000 or twice the value of the funds involved (whichever is greater) and up to 20 years of federal imprisonment.

How IRS CI Investigates Structuring and Money Laundering Cases

IRS CI investigates structuring and money laundering cases through a variety of means. In many cases, these investigations will arise out of revenue agents’ scrutiny of high-income and high-net-worth taxpayers’ returns. If a taxpayer’s returns—or documents obtained during an audit of a taxpayer’s returns—exhibit signs of money laundering, revenue agents may refer the matter to IRS CI for a possible criminal investigation.

Structuring and money laundering investigations can also arise out of information that IRS CI obtains from financial institutions and other third parties. For example, along with the obligation to file CTRs, financial institutions have an obligation to file Suspicious Activity Reports (SARs) when customers’ transactions show signs of structuring, money laundering, or other possible criminal activity. SARs can trigger investigations into high-income and high-net-worth taxpayers’ business dealings, and during these investigations, financial institutions may provide IRS CI with additional documentation as well.

IRS CI also works alongside the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), and other federal authorities to target structuring, money laundering, and other financial crimes. These authorities may be able to provide IRS CI with various forms of evidence to support structuring and money laundering investigations. Once an investigation is underway, IRS CI can also work with federal prosecutors at the U.S. Department of Justice (DOJ) to obtain subpoenas, execute search warrants, and gather evidence of criminal activity through a variety of other means.

How Targets Can Successfully Defend Against Structuring and Money Laundering Investigations

Due to the substantial risks involved with facing an IRS CI investigation, individuals and organizations accused of structuring and other forms of money laundering must be prepared to defend themselves by all means available. This requires a proactive and strategic approach guided by experienced legal counsel. Broadly speaking, the steps involved in successfully defending against an IRS CI investigation include:

• Understanding the Scope of the Investigation – When facing scrutiny from IRS CI (or any federal law enforcement authority), it is critical to understand the scope of the investigation. If you don’t know all of the allegations at issue, you won’t be able to execute a comprehensive defense.
• Determining What Evidence is Available – After discerning the scope of the investigation, it is critical to determine what evidence is available. This includes both evidence that IRS CI already has in its possession and evidence that agents may be able to obtain through subpoenas, search warrants or other means.
• Assessing the Legal Risks Involved – With a clear picture of the allegations at issue and the evidence that is available, you should be able to comprehensively assess the legal risks involved in the investigation. This includes both the federal charges that could be on the table and the penalties that could be imposed in the event of a conviction in federal court.
• Formulating a Defense Strategy – Avoiding unnecessary penalties requires a comprehensive, coordinated and highly strategic defense. Formulating an effective defense strategy will involve working closely with an experienced Texas criminal tax lawyer who understands both the relevant facts and the relevant law.
• Targeting a Specific Favorable Outcome – Whether the government’s allegations of structuring or money laundering are misguided or facing fines and prison time is a very real possibility, it is imperative to target a specific favorable outcome. Targets of IRS CI investigations must make strategic decisions about whether to focus on settling with the government, fending off an indictment or preparing to present their defenses at trial.

Of course, success is not guaranteed—and, while avoiding prosecution is a very real possibility in many cases, IRS CI investigations can also lead to high-stakes federal criminal trials. If you need to know more about how to approach an IRS CI investigation into alleged structuring or money laundering, we can help, but it is important that you contact us promptly.  

Request a Confidential Consultation with Texas Criminal Tax Lawyer Lawrence Brown

At Brown Tax, P.C., we represent high-income and high-net-worth taxpayers in significant federal tax controversies. If you are facing a structuring or money laundering investigation, call 888-870-0025 or contact us online to request a confidential consultation with Texas criminal tax lawyer Lawrence Brown.