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December 2, 2016


Texas banks help IRS fight money laundering and tax evasion

A conviction for criminal tax evasion carries serious penalties, including a stint in federal prison, hefty fines and the costs of government prosecution. Then there is the negative impact on business or individual reputation and the limitations that a criminal record can impose on future opportunity.

The role of banks in federal tax-crime investigation

The IRS and federal prosecutors are serious about investigation and enforcement of possible money laundering or tax evasion and financial institutions are required to help meet that goal.

Increasingly, federal law requires banks and bank employees to institute expensive monitoring and oversight of customer transactions and accounts to uncover patterns of behavior that could indicate money laundering or tax evasion may be occurring. According to an article in D Magazine, Texas financial institutions are finding it challenging and costly to meet their legal responsibilities in this area.

Noncompliance with these complex federal regulations can bring a bank serious financial penalties and require that expensive remediation actions be taken, so much so that some banks have closed near the international border with Mexico because customers in that area prefer to use cash. Cash transactions are closely monitored because while they may constitute innocent financial behavior, they can also indicate organized criminal activity.

The article also reports that smaller banks in the state have been merging because of the costs of regulatory compliance.

The negative impact on bank customers

The D Magazine piece describes a related problem for customers: being dropped because their banks identify financial behavior that is considered possibly indicative of illegal activity, even if it is not in the particular instances.

Any person or business dropped by its financial institution or that is questioned by its bank or by the IRS or other government official concerning banking practices should immediately contact an experienced tax lawyer. In the concerted effort to find those abusing the banking system to avoid taxation on legal or illegal gain, an innocent taxpayer can get swept up in an investigation or identified as conducting suspicious transactions.

Legal counsel can come to a client’s defense in such a situation. In many cases, the questioned financial transactions were innocently undertaken or the result of honest mistakes or mere negligence, as opposed to voluntary, fraudulent or criminal attempts to evade tax.

In addition, a financial transaction may occur because of a reasonable interpretation of tax law, in which case the taxpayer should not be penalized just because it may coincide with certain financial behavior considered as possibly indicating tax evasion or money laundering.

Bringing a tax lawyer on board early under these circumstances allows counsel to communicate with authorities on behalf of the taxpayer, launch an investigation on behalf of the client, negotiate a solution to the dispute or, if absolutely necessary, advocate vigorously in court for the client.

Tax Evasion