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Part 9. Criminal Investigation

Chapter 5. Investigate Process

Section 5. Money Laundering and Currency Crimes

9.5.5  Money Laundering and Currency Crimes

9.5.5.1  (02-15-2008)
Overview

  1. Money laundering is the process of disguising criminal proceeds and may include the movement of clean money through the United States with the intent to commit a crime in the future (e.g., terrorism). Common methods include disguising the source of the proceeds; changing the form of the proceeds; or moving the proceeds to a place where the proceeds are less likely to attract attention. The object of money laundering is ultimately to get the proceeds back to the individual who generated them. Money laundering is a necessary consequence of almost all profit generating crimes and can occur almost anywhere in the world. Money laundering is a threat to the United States tax system in that taxable illegal source proceeds go undetected along with some taxable legal source proceeds from tax evasion schemes. Both schemes use nominees, currency, multiple bank accounts, wire transfers, and international "tax havens" to avoid detection. This untaxed underground economy ultimately erodes public confidence in the tax system.

  2. The National Money Laundering Strategy, established by the Secretary of the Treasury and the Attorney General, describes the goals, objectives and priorities for combating money laundering, terrorism and related financial crimes. Tax and money laundering violations are closely related and the Internal Revenue Service (IRS) has used the money laundering statutes to combat tax evasion.

  3. The other operating divisions of the IRS coordinate to review data collected in compliance with the requirements of the money laundering statutes and Title 31 Bank Secrecy Act (BSA).

  4. Criminal Investigation (CI) enforces the money laundering statutes relative to legal source income tax crimes (i.e., abusive trusts, offshore tax evasion schemes and corporate evasion schemes); large scale narcotics crimes (through the Organized Crime and Drug Enforcement Task Force (OCDETF) program); and non-narcotics illegal income tax crimes (i.e., illegal gambling and bankruptcy fraud). Criminal Investigation is also responsible for enforcing the BSA statutes under Title 31. Bank Secrecy Act information includes Currency Transaction Reports (CTR), and Suspicious Activity Reports (SAR), Reports of Cash Payments Over $10,000 Received in a Trade or Business (Form 8300), Reports of Foreign Bank and Financial Accounts (FBAR), Registration of Money Services Business (RMSB) and Report of International Transportation of Currency and Monetary Instrument (CMIR). The Internal Revenue Code (IRC) in Title 26 also contains reporting requirements on a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Money laundering activity may violate 18 USC §1956, 18 USC §1957, 18 USC §1960, and provisions of Title 31, and 26 USC §6050I of the United States Code (USC). This section will discuss only those money laundering and currency violations under the jurisdiction of IRS, CI. These include:

    • Money Laundering - Title 18 Violations and lesser included offenses

    • Money Laundering/Currency Crimes - Title 31 Violations

    • Money Laundering - Form 8300 Violations

    • Definitions and Terms of Legal Applications

    • Forfeitures in Money Laundering Investigations

    • Money Laundering Expert Witness Cadre

    • Use of Money Laundering Posters

  5. Money laundering statutes apply to transactions occurring after the completion of the underlying criminal offense. The same transaction cannot be both a money laundering offense and the underlying specified unlawful activity (SUA) that generated the funds being laundered. For example, the initial drug deal between buyer and seller is not a transaction involving SUA proceeds because money exchanged for drugs is not proceeds at the time the exchange took place (US v. Puig-Infante, 19 F.3d 929 (5th Cir. 1994)).

  6. The applicable sections of IRM Part 9 and Law Enforcement Manual (LEM) 9 should be referred to for the authorization and use of undercover operations, consensual monitoring, informants, confidential and non-confidential expenditures, search warrants, and other investigative tools in money laundering investigations.

  7. See IRM 9.4.13, Financial Investigative Task Force regarding the participation of the various task forces that conduct money laundering investigations.

9.5.5.2  (08-27-2007)
Money Laundering-Title 18 Violations

  1. Title 18 USC §1956 and 18 USC §1957, were brought into existence by the Money Laundering Control Act of 1986, which has since been expanded. In general, these statutes prohibit knowingly engaging in financial transactions using funds derived from a SUA. Title 18 USC §1956 investigations have no dollar amount limit, other than that found in the LEM, and no requirement that a financial institution be involved; 18 USC §1957 prohibits monetary transactions over $10,000 or an aggregate of money transactions over $10,000 of criminally derived funds obtained from a SUA while utilizing a financial institution.

  2. Lesser-included offenses in money laundering investigations include:

    • 18 USC §2 (aiding and abetting)

    • 18 USC §371 or 18 USC §1956(h) (conspiracy)

    • 18 USC §1001 (false statements)

    • 18 USC §1510(b)(3)(B)(i) (obstruction of 18 USC §1956 or 18 USC §1957 or Title 31 investigations)

    • 18 USC §1621 (perjury)

    • 18 USC §1960 (illegal money transmitting business)

    • 31 USC §5322 (Title 31 criminal penalties)

    • 31 USC §5324 (structuring)

    • 31 USC §5332 (bulk cash smuggling)

    • 18 USC §1028 and 18 USC §1028A (identity theft)

    Note:

    Refer to LEM 9.14.1, Criminal Investigation Official Use Only Procedures for criteria relating to prosecution recommendations for violations of 18 USC §1956, 18 USC §1957 and Title 31.

  3. The list of SUAs change periodically and special agents should consult 18 USC §1956(c)(7), for a definition of the term "specified unlawful activity" . For a complete list of offenses visit: http://assembler.law.cornell.edu/uscode/html/uscode18/usc_sec_18_00001956----000-.html. The government must prove that the transaction proceeds under 18 USC §1956(a)(1) were in fact derived from a SUA, or in the instance of 18 USC §1956(a)(3), represented money derived from SUA. Specified unlawful activities go far beyond narcotics related offenses and include, in part, bankruptcy fraud, health care fraud, and insurance fraud. Title 26 and Title 31 offenses are not SUAs. A SUA includes:

    1. offenses listed as predicate acts under the Racketeer Influenced and Corrupt Organizations Act (RICO) statute of 18 USC §1961(1)

    2. a separate list of non-RICO offenses set forth in 18 USC §1956(c)(7)

  4. An August 1990 Memorandum of Understanding (MOU) between Department of the Treasury, the Postal Service, and Department of Justice (DOJ) requires that the IRS show Title 26 or Title 31 violations also exist in order to have jurisdiction over 18 USC §1956 or 18 USC §1957. The Title 26 or Title 31 activity requirement may be waived if no other agency objects or, if after positions are made known by each concerned agency, it is resolved to give the IRS jurisdiction.

  5. A five year criminal statute of limitations applies to all money laundering violations of 18 USC §1956 and 18 USC §1957. The five year statute also applies to violations of 18 USC §1960 absent any other specific provision. The statute of limitations runs from the date on which the money laundering offense was completed.

  6. Venue for money laundering offenses under 18 USC §1956 or 18 USC §1957 exist in:

    • any judicial district in which the financial or monetary transaction is conducted, or

    • any judicial district where a prosecution for the underlying SUA could be brought, if the defendant participated in the transfer of proceeds from the SUA from that judicial district to where the financial or monetary transaction is conducted

9.5.5.2.1  (08-27-2007)
Title 18 USC §1956

  1. Title 18 USC §1956 is the basic Title 18 money laundering offense. It has three specific parts. They are:

    • 18 USC §1956(a)(1), Domestic Financial Transactions

    • 18 USC §1956(a)(2), International Transportation of Monetary Instruments or Funds

    • 18 USC §1956(a)(3), Sting Operations

  2. The criminal penalty for a violation of 18 USC §1956(a)(1) and (2) is a fine of up to $500,000 or twice the value of the monetary instruments involved, whichever is greater, or imprisonment of up to 20 years, or both; and for a violation of 18 USC §1956(a)(3) an undetermined fine, or imprisonment of up to 20 years, or both.

  3. Title 18 USC §1956(b) provides that violators under 18 USC §1956(a)(1) or (2) are also liable for a civil penalty of not more than the greater of the value of the property, funds, or monetary instruments involved in the transaction, or $10,000. The civil penalty is intended to be imposed in addition to any criminal fine.

  4. The Federal Deposit Insurance Act provides that individuals convicted of 18 USC §1956, or conspiracy to do so, shall be precluded from all affiliation with an Federal Deposit Insurance Company (FDIC) insured institution, including employment or ownership, for a minimum of 10 years from the date of conviction.

  5. Title 18 USC §1956(h) and 18 USC §1957 do not carry corresponding civil penalties.

9.5.5.2.1.1  (08-27-2007)
Title 18 USC §1956(a)(1), Domestic Financial Transactions

  1. With respect to 18 USC §1956(a)(1), the government must show each of the following elements:

    1. the defendant conducted or attempted to conduct

    2. a financial transaction

    3. knowing that the property involved in the transaction represented the proceeds of some form of unlawful activity

    4. which in fact involved the proceeds of SUA with one of the following specific intents listed in paragraph (2).

  2. Without proof of one of these four specific intents, there is no crime.

    1. Title 18 USC §1956(a)(1)(A)(i) acting with the intent to promote the carrying on of SUA

    2. Title 18 USC §1956(a)(1)(A)(ii) acting with the intent to engage in conduct which violates 26 USC §7201 or 26 USC §7206

    3. Title 18 USC §1956(a)(1)(B)(i) acting with the knowledge that the transaction is designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds of the SUA

    4. Title 18 USC §1956(a)(1)(B)(ii) acting with the knowledge that the transaction is designed in whole or in part to avoid a Federal or state transaction reporting requirement

  3. Special agents are cautioned to avoid charging 18 USC §1956(a)(1)(B)(i) in instances when a subject makes a purchase with illegal proceeds and titles the asset in his/her own name, without any additional sign of intent to conceal or disguise.

9.5.5.2.1.2  (08-27-2007)
Title 18 USC §1956(a)(2), International Transportation of Monetary Instruments or Funds

  1. With respect to 18 USC §1956(a)(2), the government must prove the elements that a defendant:

    1. transports, transmits or transfers (or attempts to do so)

    2. a monetary instrument or funds

    3. from a place in the United States to or through a place outside the United States; or, to a place in the United States from or through a place outside the United States with one of the following intents listed in paragraph (2)

  2. The specific intent is either:

    1. Title 18 USC §1956(a)(2)(A) with the intent to promote a SUA

    2. Title 18 USC §1956(a)(2)(B) with the knowledge that the funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part to under (18 USC §1956(a)(2)(B)(i) conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of the SUA); or to avoid a Federal or state transaction reporting requirement under 18 USC §1956(a)(2)(B)(ii)

  3. Unlike the corresponding provision in 18 USC §1956(a)(1)(A)(i), there is no requirement in 18 USC §1956(a)(2) that the monetary instrument or funds be the product of unlawful activity. Title 18 USC §1956(a)(2)(B)(i) requires proof that the defendant knew that the monetary instruments or funds involved represented the proceeds of some form of unlawful activity. But this provision does not require the government to prove that the property was, in fact, the proceeds of an SUA. Therefore, offenses under 18 USC §1956(a)(2)(A) can involve legally derived funds used to promote an SUA.

  4. Under this section, the movement of funds does not include tax evasion. Tax evasion is not an SUA and intent to evade tax is not an enumerated intent of the transportation offense.

9.5.5.2.1.3  (08-27-2007)
Title 18 USC §1956(a)(3), Sting Operations

  1. Title 18 USC §1956(a)(3) is a sting provision that allows for undercover operations where the government, or a direct informant, represents funds as being derived from a SUA. This subsection was added to the statute expressly to permit prosecution where the defendant believes the proceeds were derived from a SUA because of a representation made by a law enforcement officer (LEO) or an informant working under the LEO's control. The elements include that a defendant conducts or attempts to conduct a financial transaction involving property represented by a LEO or another person at the LEO's direction, to be either:

    1. proceeds of an SUA, or

    2. property used to conduct or facilitate an SUA

  2. The government must prove that the defendant's intent was to:

    1. promote the carrying on of an SUA - Title 18 USC §1956(a)(3)(A);

    2. conceal or disguise the nature, location, source, ownership, or control of property represented to be proceeds of the SUA - Title 18 USC §1956(a)(3)(B); or

    3. avoid a Federal or state transaction reporting requirement - Title 18 USC §1956(a)(3)(C)

  3. Under 18 USC §1956(a)(1), it is an offense to take known drug money and intentionally engage in a financial transaction. However, it is not a money laundering offense to engage in a financial transaction in a drug deal if the money was not the proceeds of an SUA before the transaction began. Therefore, an undercover agent or directed informant must represent that the money involved in a financial transaction is the proceeds of some past criminal activity (or property used to facilitate past criminal activity).

  4. Criminal Investigation or the attorney for the government must decide how far to let a sting operation go to satisfy the financial transaction element. Circumstantial evidence will have to be used to show intent if an arrest is made before a defendant does anything with funds received from an undercover agent or a directed informant. In such instances, the delivery of funds must satisfy the definition of a financial transaction, the undercover agent or directed informant must properly represent the funds as being proceeds of a past SUA, and a defendant must accept the funds with one of the intents set forth in 18 USC §1956(a)(3)(A), (B) or (C).

  5. Defenses in undercover operations include entrapment, i.e., government inducement or a lack of predisposition by a defendant to commit a crime, and outrageous government conduct whereby the government violates a defendant’s constitutional rights. A review of predisposition must be made in any undercover operation, especially for a first-time offender with nothing criminal in his/her background.

  6. The sting provision does not include conduct intended to evade tax.

9.5.5.2.1.4  (11-04-2004)
Title 18 USC §1956(h), Conspiracy

  1. Department of Justice has directed that conspiracy to violate 18 USC §1956 or 18 USC §1957 will be charged under 18 USC §1956(h), and not under 18 USC §371.

9.5.5.2.1.5  (11-04-2004)
Definitions of Terms in Title 18 USC §1956, Violations

  1. The following is intended to assist the special agent in identifying the elements of 18 USC §1956 violations. The statutory language has been interpreted by the government and the courts and may not be applicable in all investigations and in all jurisdictions. Special agents must work closely with the attorney for the government to ensure the local jurisdictional court rulings are applied to the facts and evidence of each investigation.

9.5.5.2.1.5.1  (08-27-2007)
Definition of Proceeds of Specified Unlawful Activity

  1. Proceeds is not statutorily defined. It has been interpreted to include more than the money derived from unlawful activity. It may include:

    1. a line of credit

    2. real property

    3. uncashed checks

    4. inventory acquired in a fraud scheme

    5. assets concealed in bankruptcy fraud

  2. Circumstantial evidence is sufficient to prove that a transaction involved proceeds of a SUA, e.g., evidence that a defendant traffics drugs, has large amounts of currency, and has no or little legitimate income is sufficient. Because this is a criminal matter, each element of the crime must be proved beyond a reasonable doubt, including any elements proved by circumstantial evidence.

  3. It is critical to determine when property or funds become the proceeds of an underlying crime. Money in a consummated drug transaction becomes proceeds; any subsequent transaction could be charged as a money laundering offense, e.g., an automobile purchased with SUA funds qualifies as proceeds. The definition of when funds become SUA proceeds in transactions that involve a middleman is based on the party employing the middleman. If a victim in a fraud scheme sends an innocent party to deliver funds to a defendant, the funds become proceeds upon receipt by the defendant; whereas, if the defendant sends an innocent assistant to receive funds, the funds become proceeds upon receipt by the assistant.

  4. Defendants often commingle SUA proceeds with legitimate funds. The government need not prove that all proceeds in a transaction were unlawfully derived, but must be able to trace some of the proceeds to a SUA. Criminally derived proceeds deposited with legal funds are considered to be withdrawn last unless the account/business is deemed to be permeated with fraud. This implies that the business operations are so intertwined with fraud that to segregate the legitimate operation and profits is impossible. Special agents should work closely with the attorney for the government when investigations involve commingled funds to ensure the elements of the crime are met.

9.5.5.2.1.5.2  (08-27-2007)
Definition of Knowing that the Property Involved...

  1. The term knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity means that the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under state, Federal, or foreign law, regardless of whether or not such activity is specified in 18 USC §1956(c)(7).

9.5.5.2.1.5.3  (08-27-2007)
Definition of Intent to Promote...

  1. Title 18 USC §1956(a)(1)(A)(i): intent to promote the carrying on of specified unlawful activity:

    1. Circumstantial evidence is sufficient to show intent for this section. The government is not required to prove that a defendant intended to violate a specific statute, but did intend to promote or facilitate an activity that he/she knew to be illegal. A violation may occur even if the promoted SUA is never completed.

    2. A defendant can engage in financial transactions that promote not only ongoing or future activity, but also prior activity, e.g., 18 USC §1956(a)(1)(A)(i) can be charged for the deposit of funds in a mail fraud scheme which issues IRS refund checks to fictitious employees.

    3. Under 18 USC §1956(a)(1)(A)(i), the payment of proceeds to fraud victims to entice him/her to continue to invest in a fraudulent scheme, or to keep quiet about an ongoing scheme, could be promotion.

    4. A prosecution recommendation for the simple deposit of criminal proceeds into one’s bank account as money laundering promotion is generally not advisable.

9.5.5.2.1.5.4  (11-04-2004)
Definition of Conducts

  1. The term conducts includes initiating, concluding, or participating in initiating, or concluding a transaction.

9.5.5.2.1.5.5  (08-27-2007)
Definition of to Conceal or Disguise or Intent to Engage in Conduct

  1. Title 18 USC §1956(a)(1)(B)(i): intent to conceal or disguise the nature, source, ownership, or control of proceeds of SUA.

    1. Circumstantial evidence may be used to show intent that a transaction's purpose was to conceal or disguise under this section.

    2. The government need only prove that a defendant knew a transaction was designed to conceal the nature, location, source, ownership or control of proceeds of some felonious activity, that were, in fact, from an SUA. The evidence can include using a third party’s name or business account or commingling illegal funds with legitimate funds.

    3. The government need only show that a defendant had knowledge a transaction was designed to conceal illegal activity proceeds and not that a defendant had the purpose of concealing illegal activity proceeds. This applies to individuals who are willfully blind. The majority of courts ruling in this area have held that converting proceeds into goods or services can violate 18 USC §1956(a)(1)(B)(i) if the expenditures demonstrate an ulterior design to conceal or disguise.

      Note:

      The US Sentencing Commission as said simple "receipt and deposit" of SUA proceeds causes little or no harm to society and simply constitutes the completion of an underlying offense. Courts have held there is no intent to conceal by the mere deposit of funds into an account. Therefore, prosecution of a receipt and deposit transaction should only be recommended for transactions that involve the movement or spending of funds subsequent to an initial deposit.

  2. Title USC 18 §1956(a)(1)(A)(ii): intent to engage in conduct constituting a violation of 26 USC §7201 or 26 USC §7206.

    1. Under this section, a defendant's objective is to engage in conduct constituting a violation of 26 USC §7201 or 26 USC §7206.

    2. An individual may be prosecuted under 18 USC §1956(a)(1)(A)(ii) for engaging in a money laundering financial transaction with the intent to violate 26 USC §7201 even where the tax year has not yet concluded and the tax return has not yet been filed. However, there must be some proof that the person engaged in the financial transaction was aware the transaction related in some way to an intended violation of 26 USC §7201 or 26 USC §7206.

    3. Title 18 USC §1956(a)(1)(A)(ii) does not limit the type of tax or the type of document submitted. Also, the tax involved need not be the tax of the person engaging in the financial transaction, i.e., the statute can apply to a person who intends to assist another person in violating the tax laws.

    4. Absent exceptional circumstances, DOJ, Tax Division will not authorize a 18 USC §1956(a)(1)(A)(ii) charge in tax crimes involving mail, wire, or bank fraud when a tax return or other IRS form or document is the only mailing charged, or when the only wire transmission to the IRS involves a tax return or other IRS form, or the transmission of a refund check to a bank account by an electronic funds transfer, or when the mailing, wire transfer, or representation charged is incidental to the underlying violation of Internal Revenue laws.

9.5.5.2.1.5.6  (11-04-2004)
Definition of Money Laundering Transaction

  1. By statute, the term transaction includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, and with respect to a financial institution includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, use of a safe deposit box, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected.

  2. The courts and the government have ruled or taken the following positions relating to the term transaction:
    a) An exchange of cash between two drug dealers arguably is a transaction under the general definition, i.e., a transfer or other disposition (DOJ).
    b) Mere transportation of funds within the United States or mere possession of supposed drug cash without a subsequent disposition ARE NOT transactions (Courts).
    c) Each transaction involving dirty money is intended to be a separate offense, e.g., a drug dealer who divides $1 million in drug money into smaller lots and deposits it in 10 different banks has committed 10 violations, and two more violations if he/she withdraws some of the money and purchases a car and a boat (Congress).

9.5.5.2.1.5.7  (08-27-2007)
Definition of Financial Transaction

  1. The term financial transaction as defined by 18 USC §1956(c)(4) specifies that a transaction must meet one of four requirements to be a financial transaction:

    1. Transactions involving the movement of funds by wire or other means that in any way affects interstate or foreign commerce. The courts have affirmed the following movement of funds to be financial transactions: giving a check in exchange for cash, sending cash through the mail, transfer of a box of currency from one person to another person, various transfers of currency from a defendant's house to vehicles parked outside and the movement of drug money from an undercover agent to another person who intended to carry the money in interstate travel.

    2. Transactions involving the use of a monetary instrument that in any way affects interstate or foreign commerce. This includes a transfer of cash or any other monetary instrument from one person to another without involvement of a financial institution.

    3. Transactions involving the transfer of title to any real property, vehicle, vessel, or aircraft (as of October 28, 1992) that in any way affects foreign or interstate commerce, e.g., a transfer of title of a vehicle from one person to another person.

    4. Transactions involving a financial institution, as defined by 18 USC §1956(c)(6) and 31 USC §5312(a)(2) or 31 CFR 103.11, that is engaged in, or the activities of which affect interstate or foreign commerce. A court found a financial services company which received and invested funds to be a financial institution because it behaved like a bank. Car dealers, pawnbrokers, and precious metal dealers are also considered financial institutions.

  2. The courts have affirmed Congress' determination that property derived from narcotics trafficking affects interstate commerce.

  3. The courts have interpreted funds movement broadly, but they have ruled that mere possession of drug money in one's house and mere transportation of funds by car or airplane are not financial transactions.

9.5.5.2.1.5.8  (08-27-2007)
Definition of Monetary Instrument

  1. The term monetary instrument is defined as:

    1. coin or currency of the United States or of any other country

    2. traveler's checks, personal checks, bank checks, and money orders, or

    3. investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery

9.5.5.2.1.5.9  (08-27-2007)
Definition of Financial Institution

  1. The term financial institution is defined under 31 USC §5312(a)(2). The International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 amended the definition to include credit unions, commodities merchants, non-financial trades and businesses and informal money transfers systems which include underground banking systems, black market peso exchanges and hawalas.

    Note:

    Alternate remittance systems represent informal or unregulated means of transferring value between or among multiple locations. Often these systems are comprised of geographic networks and are described by a variety of specific terms depending on the region or community they serve.Hawala is the term often used to describe alternative remittance systems or services in the Middle East.

9.5.5.2.1.5.10  (08-27-2007)
Definition of Avoiding a Transaction Reporting Requirement

  1. Legislative history has held the term avoid is synonymous with evade as it is used in 18 USC §1956(a)(1)(B)(ii) and 18 USC §1956(a)(2)(B)(ii), i.e., knowing that the transaction is designed in whole or in part to avoid a transaction reporting requirement under state or Federal law.

    Note:

    For example, if A gave his/her cocaine profits to B to launder through a network of smurfs, B could be charged with 18 USC §1956(a)(1)(B)(ii) even if he/she was unaware that the funds actually came from a SUA provided that it could be shown that B knew the funds came from some form of unlawful activity.

    Note:

    A smurf is an individual(s) who makes numerous same-day currency deposits of less than $10,000, usually at several different banks, to evade the filing of CTRs. The act of conducting such transactions is termed "smurfing" .

9.5.5.2.1.5.11  (08-27-2007)
Definition 18 USC §1956(a)(3), Represented

  1. The term represented in this subsection means any representation made by either a law enforcement officer or by another person at the direction or approval of a Federal official who is authorized to investigate or prosecute 18 USC §1956(a)(3) violations. Explicit representations need not be made, but are preferred.

  2. Title 18 USC §1956(a)(1) and18 USC §1956(a)(3) are parallel statutes, i.e., they address the same conduct and punish the same wrong. The requirement of subsection 18 USC §1956(a)(3) that the property be represented as either the proceeds of a SUA or as being used to facilitate or conduct criminal activity replaces the knowledge and proceeds requirements of 18 USC §1956(a)(1).

  3. It is an offense if an undercover agent explicitly says, this is drug money, and a defendant uses (or attempts to use) the money to conduct a financial transaction to promote a future SUA (buying a vessel to ship drugs), or to conceal or disguise the ownership of money (wires to a fictitious corporate account), or to violate a currency reporting requirement (structured check purchases). It is also an offense if an undercover agent says, this airplane is used to smuggle drugs, and a defendant then engages in a financial transaction that involves the property with one of the specific intents.

  4. In contrast, as an example of an implied representation, a jury could infer that a defendant knew certain funds were drug money by a veiled reference from an undercover agent to a co-conspirator that their currency exchange should charge higher commissions due to the dangers in dealing with drug dealers. The courts have held that it is enough for an undercover agent to make a defendant aware of circumstances from which a reasonable person would infer that certain property was criminal proceeds. Also, the government need not recite the alleged source of represented funds during each transaction in a sting operation.

9.5.5.2.2  (08-27-2007)
Title 18 USC §1957 Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity

  1. Title 18 USC §1957 prohibits an actual or an attempted monetary transaction of over $10,000 in SUA proceeds.

  2. To prove a violation of 18 USC §1957, the government must prove:

    1. the defendant knowingly

    2. engaged in, or attempted to engage in

    3. a monetary transaction (i.e., a transaction by, through or to a financial institution)

    4. in criminally derived property of a value in excess of $10,000 and the property is derived from SUA

  3. The statute does not require that these funds be used for any additional criminal purpose or that the defendant engage in the transaction with any specific intent. Simply spending the proceeds violates this statute.

  4. This statute applies not only of a person who engages in a monetary transaction with a financial institution knowing the cash is criminal proceeds, but also to a financial institution employee who accepts cash knowing it is criminal proceeds. An individual who initiates and then benefits from a transaction that was effected by another individual or entity, can be charged with the direct charge or as an aider and abettor, e.g., a person who uses nominees to purchase real estate.

  5. Department of Justice Asset Forfeiture and Money Laundering Section must approve any prosecution of an attorney under 18 USC §1957 for the receipt and deposit of funds allegedly derived from a SUA.

  6. Title 18 USC §1957 is the equivalent of a financial transaction offense under §1956(a)(1) except that the specific intent requirements are replaced by the requirement that the (monetary) transaction involve an amount over $10,000 and a financial institution as defined in 18 USC §1956. Title 18 USC §1956(a)(1) requires proof of a particular purpose or knowledge (e.g. intent to promote an SUA), whereas 18 USC §1957 does not.

  7. The criminal penalty for a violation of 18 USC §1957 is a fine in accordance with 18 USC §3571 – 18 USC §3574 (or up to twice the amount of the criminally derived property involved in the transaction), up to 10 years imprisonment, or both.

  8. Title 18 USC §1957 does not carry corresponding civil penalties.

9.5.5.2.2.1  (08-27-2007)
Definitions of Terms for Use in Title 18 USC §1957 Violations

  1. The following is intended to assist the special agent in identifying the elements of 18 USC §1957 violations. The statutory language has been interpreted by the government and the courts and may not be applicable in all investigations and in all jurisdictions. Special agents must work closely with the attorney for the government to ensure the local jurisdictional court rulings are applied to the facts and evidence of each investigation.

  2. The terms conducts, monetary instrument and financial institution have the same meaning under 18 USC §1957 as under 18 USC §1956. See subsections 9.5.5.2.1.5.4, 9.5.5.2.1.5.8 and 9.5.5.2.1.5.9, respectively.

9.5.5.2.2.1.1  (08-27-2007)
Definition of Monetary Transaction

  1. The term monetary transaction is narrower than the term financial transaction as used in 18 USC §1956. In 18 USC §1957 violations, monetary transactions require that a financial institution and at least $10,000 be involved in the transaction.

  2. The terms monetary transaction and financial institution mean:

    1. the deposit, withdrawal, transfer, or exchange

    2. in or affecting interstate or foreign commerce

    3. of funds or a monetary instrument (as defined in 18 USC §1956(c)(5))

    4. by, through, or to a financial institution (as defined in 18 USC §1956(c)(6))

    5. including any transaction that would be a financial transaction under 18 USC §1956(c)(4)(B)

    6. but such term does not include any transaction necessary to preserve a person's right to representation as guaranteed by the Sixth Amendment to the Constitution

9.5.5.2.2.1.2  (08-27-2007)
Definition of Criminally Derived Property

  1. The term criminally derived property means any property constituting, or derived from proceeds obtained from a criminal offense. See subsection 9.5.5.2.1.5.1, Definition of Proceeds of Specified Unlawful Activity.

  2. The government must establish by direct or circumstantial proof that a defendant actually or constructively knew property involved in a financial transaction was the proceeds of some state, Federal, or foreign felonious activity and not the proceeds of a specific SUA.

9.5.5.2.3  (08-27-2007)
Title 18 USC §1960, Prohibition of Unlicensed Money Transmitting Business

  1. Effective October 26, 2001, 18 USC §1960 was revised to relax the scienter requirement and broaden the scope of the statute to a " general intent" crime. It is now an offense for anyone to knowingly conduct any unlicensed money transmitting business, whether or not the defendant knew that the operation was required to be licensed or that operation without a license was a criminal offense. The proceeds of illegal money transmitting businesses are subject to both civil and criminal forfeiture to under 18 USC §981(a)(1)(A) and 18 USC §982(a)(1).

  2. The criminal penalty for a violation of 18 USC §1960 is a fine in accordance with 18 USC §3571–18 USC §3574, up to five years imprisonment, or both.

  3. A person who violates this offense knowingly conducts, controls, manages, supervises, directs or owns all or part of an unlicensed money transmitting business by:

    1. operating without a state license, or

    2. failing to comply with Federal money services business (MSB) registration requirements, or

    3. transferring money knowing the funds transmitted were criminally derived or intended to promote or support some unlawful activity

  4. The term "money transmitting" includes transferring funds on behalf of the public by any and all means including, but not limited to transfers within the country, or to locations abroad by wire, check, draft, facsimile, or courier.

  5. The term "State" means by any state of the United States, and the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States.

  6. "Money transmitting businesses" and " money services businesses" are terms used by Title 31 and the regulations implementing the registration requirements, respectively. These terms should be understood to encompass the same array of businesses. There are five classes of financial institutions referred to as MSBs:

    1. currency dealers or exchangers

    2. check cashers

    3. issuers of travelers checks or money orders

    4. sellers or redeemers of travelers checks or money orders

    5. money transmitters

    Note:

    The US Postal Service (USPS), a bank, or any other person registered with and regulated or examined by the Security and Exchange Commission (SEC) or the Commodity Futures Trading Commission are not considered money services businesses.

  7. Title 18 USC §1960 (b)(2) defines "money transmitting " to include "transferring funds on behalf of the public by any and all means including but not limited to transfers within this or to locations abroad by wire, check, draft, facsimile or courier ...." It is not clear that check cashers and currency exchanges meet this definition for purposes of a prosecution under 18 USC §1960. The Department of Justice (DOJ), Asset Forfeiture and Money Laundering Section advises against prosecution of check cashers and currency exchanges under 18 USC §1960.

  8. On August 20, 1999, the Department of the Treasury issued a final rule concerning application of the Bank Secrecy Act to MSBs. The rule (i) revises the definition of certain businesses for BSA purposes, and (ii) requires MSBs to register with the Department of the Treasury and maintain a list of its agents as required under 31 USC §5330. Under the final rule, MSBs must register with the Department of the Treasury by filing the form that FinCEN specifies with the IRS Detroit Computing Center (or such other location as the form may specify) and renew their registration every two years. The information required by 31 USC §5330(b) and any other information required by the form must be reported in the manner and to the extent required by the form.

  9. Money services businesses must maintain a list of their agents, available to any appropriate law enforcement agency upon request, and update the list annually. The following information must be included on the list of agents:

    1. the name, address, and telephone number of the agent

    2. the type of service or services that the agent provides on behalf of the MSB maintaining the agent list

    3. a listing of the months during the 12 months immediately preceding the date of the most recent agent list in which the agent's gross transaction amount exceeds $100,000 from the sale of products or services offered by the MSB maintaining the agent list

    4. the name and address of the bank(s) at which the agent maintains transaction account(s) for all or part of the funds received from the sale of products or services offered by the MSB maintaining the agent list

    5. the year in which the agent first became an agent of the MSB maintaining the agent list

    6. the number of branches or subagents the agent has

  10. Agents of MSBs are not required to register or keep a list of their own agents if they are MSBs solely because they serve as agents of other MSBs. Thus, a person that engages in MSB activities both on its own behalf and as an agent for others must register. For example, a supermarket corporation that acts as an agent for an issuer of money orders and performs no other services of a nature and value that would cause the corporation to be an MSB, is not required to register. However, registration would be required if the supermarket corporation, in addition to acting as an agent of an issuer of money orders, cashed checks or exchanged currencies (other than as an agent for another business) in an amount greater than $1,000 in currency or monetary or other instruments for any person on any day, in one or more transactions.

  11. Any person failing to comply with the registration or agent list requirement may be subject to criminal prosecution and may be assessed a civil penalty of $5,000 for each violation. Each day during which a violation occurs constitutes a separate violation. In addition, the Secretary of the Treasury may bring a civil action to enjoin the continued violation.

  12. On October 26, 2001, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 created the requirement that all MSBs report suspicious activities detected as of January 1, 2002.

9.5.5.2.4  (08-27-2007)
Title 18 USC §1028 and 18 USC §1028A, Identity Theft

  1. On October 1, 1998, the Identity Theft and Assumption Deterrence Act of 1998 went into effect. The Act amended 18 USC §1028 by, among other things, adding Section (a)(7) which establishes an offense for anyone who knowingly, transfers, possesses, or uses without lawful authority another person's means of identification with the intent to commit or aid or abet any unlawful activity that constitutes a violation of Federal law or a felony under any applicable state or local law.

  2. Title 18 USC §1028, fraud and related activity in connection with identification documents and information, under Sections (a)(1)-(6) contain other provisions making it an offense to:

    1. Knowingly and without lawful authority produce an identification document authentication feature or a false identification document.

    2. Knowingly transfer an identification document authentication feature or a false identification document knowing such document was stolen or produced without lawful authority.

    3. Knowingly possess with intent to use or transfer unlawfully, five or more identification documents authentication features or false identification documents.

    4. Knowingly possess an identification document authentication feature, or a false authentication feature with the intent to use such document to defraud the United States.

    5. Knowingly produce, transfer, or possess a document-making implement or authentication feature with the intent that it will be used to produce a false identification document.

    6. Knowingly possess an identification document or authentication feature that is or appears to be of the United States which is stolen or produced without lawful authority, knowing such document was stolen or produced without lawful authority.

  3. The term "means of identification" includes any name or number used alone or in conjunction with any other information to identify a specific individual.

  4. Identity theft violations should only be utilized when it enhances the overall investigative strategy. It is not intended to be a stand-alone violation, but to assist in enhancing the investigation of Questionable Refund Program (QRP) and money laundering schemes. This violation can be charged in conjunction with money laundering violations or separately if there is insufficient evidence to support a money laundering charge. For example, during a money laundering investigation involving heath care fraud, evidence of 18 USC §1028 or 18 USC §1028A are developed. Both money laundering and identity fraud charges may be charged. If the money laundering evidence is insufficient, the identity theft charges may still be recommended against the supplier of the fraudulent identities when no financial nexus exists in the underlying fraud scheme.

  5. Civil and criminal forfeiture provisions may be applicable in money laundering investigations involving 18 USC §1028 and 18 USC §1028A under 18 USC §981(a)(1)(C) and 18 USC §982(a)(2), respectively. However, no forfeiture provisions are applicable if the identity fraud violations are directly linked to the investigation of a substantive tax charge (absent extraordinary and compelling circumstances).

  6. Special agents should consult with Criminal Tax (CT) Counsel, DOJ, Tax Division and the attorney for the government early in the investigation when contemplating recommendation of these violations. A recommendation of 18 USC §1028 and 18 USC §1028A directly linked to a substantive tax violation will be reviewed by DOJ, Tax Division.

  7. See 18 USC §1028 and 18 USC §1028A for additional definitions of key terms relative to this statute and applicable fines and terms of imprisonment. The offense penalties vary depending on the intent and associated criminal activity.

9.5.5.3  (08-27-2007)
Title 31 Violations

  1. Title 31, known as the Bank Secrecy Act (BSA), requires filing reports with the government and recordkeeping by financial institutions or individuals for domestic and foreign transactions involving currency, monetary instruments, and foreign accounts. It also sets forth punishments for the failure to make or falsify reports or records. Offenses investigated by CI are summarized in the following sections. Title 31, Federal Criminal Code, Chapter 53, Money and Finance, contains information regarding the purposes, specific offenses, definitions and penalties for use with this Title.

  2. Under 18 USC §3282, the statute of limitations for violations of 31 USC §5322, 31 USC §5324, and 31 USC §5332 is five years.

  3. Title 31 CFR 103.56(b)(8) gives the IRS Commissioner authority to examine all financial institutions for Title 31 compliance that are not currently examined by Federal bank supervisory agencies, except for brokers or dealers in securities. Title 31 CFR 103.56(c)(2) gives the IRS Commissioner the authority to investigate all criminal violations of Title 31 (except with respect to reports of transportation of currency or monetary instruments). Title 31 civil examinations of certain non-bank financial institutions are the responsibility of the IRS Small Business/Self-Employed (SB/SE) operating division.

  4. In Delegation Order No. 143 (see IRM 1.2.2, Delegations of Authority (Delegation Order 25-5)), as revised, the IRS Commissioner delegated the authority to initiate criminal investigations of:

    1. financial institutions that are not currently examined by Federal bank supervisory agencies, except for brokers or dealers in securities, to the Director and Deputy Director, Operations Policy and Support, CI:OPS, and the Special Agents in Charge (SAC), CI

    2. banks, brokers and dealers in securities referenced in 31 CFR 103.18 through CFR 103.19 for possible criminal violations of 31 CFR Part 103 (except 31 CFR 103.23 and CFR 103.48). These must be authorized by the Chief, CI, pursuant to Treasury Order 150-10 and Directive 15-41.

  5. The SAC may ask for or agree to participate in a grand jury investigation in accordance with the appropriate procedures (see IRM 9.5.2, Grand Jury Investigations). The authority to initiate a Title 31 investigation is not redelegated any lower than the SAC (see IRM 9.4.1, General, Primary and Subject Investigations.)

  6. The historical emphasis of the IRS in Title 31 money laundering investigations has related to the failure to file or the false filing of Currency Transaction Reports (CTRs) (formerly Form 4789), FinCEN Form 104, i.e., the requirement that a financial institution file a CTR when a person conducts a currency transaction of more than $10,000 with the financial institution. IRS investigations have resulted in numerous convictions of individuals and financial institutions for the structuring of currency deposits via a network of smurfs (those who make numerous same-day currency deposits of less than $10,000, usually at several different banks, to evade the filing of CTRs). The smurfing of currency was and often still is a popular method of laundering drug profits.

  7. The government has been successful in the prosecution of structuring violations under Title 31 by showing that a defendant knew that his/her structured deposits with a financial institution were designed to evade the filing of CTRs. However, in Ratzlaff v. United States, 114 S. Ct. 655 (1994), the US Supreme Court ruled that the willfulness requirement of 31 USC §5322, as it pertained to the structuring of currency transactions to evade the filing of CTRs under 31 USC §5324, meant that the government had to show that a defendant knew that the structuring of currency transactions to evade the filing of CTRs was in fact illegal.

  8. The Money Laundering Suppression Act of 1994, Pub. L. 103–325 (September 23, 1994), included a legislative "fix" to the Supreme Court's decision in Ratzlaff. Title 31 USC §5324 was amended to exclude the willfulness requirement.

9.5.5.3.1  (08-27-2007)
Title 31 Investigation of a Financial Institution

  1. If an allegation of possible Title 31 violations committed by a financial institution is received, either by referral from the Department of the Treasury, by investigative development, or otherwise, the following procedures must be followed if the field office desires to obtain jurisdiction to conduct an investigation:

    1. The attorney for the government will be given a written summary of the information developed concerning the potential violation, including the identity of all bank employees suspected of participating in the violation.

    2. The commitment of the attorney for the government to investigate the alleged violation must be obtained.

    3. A request for jurisdiction with the concurrence and signature of the Director, Field Operations will be sent to the Chief, CI, and must include the name of the attorney for the government who provided the commitment along with a summary of the facts of the allegation specifying the full name and address of the financial institution and whether the investigation covers a particular branch or the entire financial institution. Also included in the request must be the years under investigation and the request for copies of regulatory agency compliance reports for a specified period of time.

  2. When authorization is approved, CI:OPS will notify the Assistant Director, Regulatory Policy and Programs Division of Financial Crimes Enforcement Network (FinCEN), and the regulatory agency that governs the financial institution involved.

  3. The authorization to conduct the investigation will expire in 120 days. If, at the end of 120 days a primary investigation (PI) is not elevated to a subject criminal investigation (SCI), and CI wants to continue the investigation, the authorization must be renewed. If an SCI(s) is numbered, then the authorization will be in effect until the conclusion of the criminal investigation.

  4. It is not necessary to number an investigation of a bank as a corporate entity in order to obtain jurisdiction. Jurisdiction is for the purpose of conducting a criminal investigation of possible Title 31 violations committed by the financial institution, or by any of its current or former officers. It is not necessary to make an additional request for jurisdiction of additional officers of the same financial institution if they are later identified as possible violators. However, a grand jury expansion request will be prepared and submitted.

  5. When CI determines that civil penalties are warranted against a financial institution, a detailed report will be submitted to the Chief, CI, for compliance coordination with the Assistant Director, Regulatory Policy and Programs Division at FinCEN. The report will identify the financial institution and each partner, officer, director, or employee against whom the penalty recommendation is made (see IRM 9.5.13, Civil Considerations).

    Note:

    Recommendations for civil penalties can be made at any time, but should not jeopardize an ongoing criminal investigation. All recommendations will be sanitized of grand jury material, and must contain a statement that information contained in the recommendation does not include grand jury material. Tax information can only be released if a related statute call has been made, and should be communicated to FinCEN so that 26 USC §6103 are followed regarding subsequent use (see IRM 9.3.1, Disclosure.)

  6. Reports for civil penalty recommendations will consist of the following information (IRM 9.5.14, Civil Activity at the Close of the Subject Criminal Investigation, subsection 9.5.14.11):

    1. A brief summary of the evidence, including evidence of related violations, e.g., narcotics charges in which drug proceeds were laundered.

    2. For Title 31 investigations resulting in an indictment, a summary of the charges in the indictment and the convicted charges.

    3. The scope of the Title 31 crime including the amount of money laundered, the total dollar amount of unreported currency transactions in the indictment, the number of CTRs not properly filed, and the number of improperly reported transactions named in the indictment.

    4. Copies of any public information such as a copy of the indictment, plea agreement, sentencing memorandum, affidavit for search warrants, arrest warrants, press releases and news articles.

  7. The attorney for the government and the Assistant Director, Regulatory Policy and Programs Division at FinCEN may decide that the assessment of a civil penalty in a Title 31 investigation is appropriate in lieu of prosecution. Field offices will advise the Chief, CI, of the agreement as soon as an agreement is negotiated. If checks are received from a financial institution as payment for the civil penalties prior to assessment, the checks should be mailed to the Assistant Director, Regulatory Policy and Programs Division at FinCEN, Attn: FinCEN, PO Box 39, Vienna, Va., 22183-0039 with a copy of any court order with respect to the stipulation for settlement. The field should then follow up with a recommendation for civil assessment.

9.5.5.3.2  (08-27-2007)
Investigation of Title 31 Violations – Non Financial Institution

  1. Under the authorization of the SAC, CI has jurisdiction to investigate allegations of violations of 31 USC §5324 structuring transactions to evade reporting requirements and 31 USC §5332, Bulk Cash Smuggling.

  2. Title 31 USC §5324(a) prohibits a person from:

    • causing or attempting to cause a domestic financial institution to fail to file a CTR or fail to keep records for purchases of bank checks and drafts, cashier’s checks, money orders, and traveler’s checks over $3,000

    • causing or attempting to cause a domestic financial institution to fail to file a CTR, or keep records for purchases of bank checks and drafts, cashier’s checks, money orders and traveler’s checks over $3,000

    • structuring or assisting in structuring, or attempting to structure or assisting in structuring, any transaction with one or more domestic financial institutions

  3. Title 31 USC §5324(b) prohibits a person from engaging in any of the following activity:

    • failing to file a Form 8300 as required by 31 USC §5331

    • attempting to cause a person to fail to file a Form 8300

    • filing or causing or attempting to cause a person to file a Form 8300 that contains a material omission or misstatement of fact

    • structuring or assisting in structuring, or attempting to structure or assist in structuring, any transaction with one or more non-financial trades or businesses

  4. Title 31 USC §5324(c) prohibits a person from engaging in any of the following activity:

    • failing to file a CMIR

    • attempting to cause a person to fail to file a CMIR

    • to filing or causing or attempting to cause a person to file a CMIR that contains a material omission or misstatement of fact

    • structuring or assisting in structuring, or attempting to structure or assisting in structuring, any importation or exportation of monetary instruments.

      Note:

      CMIR violations are within the jurisdiction of the Bureau of Immigration and Customs Enforcement (ICE).

  5. Currency Transaction Reports, CTRs by Casinos, Reports of Foreign Bank and Financial Accounts (FBAR), and Forms 8300 must be filed with the Detroit Computing Center or with the local IRS office. Hence, venue involving Title 26 or Title 31 investigations for falsification or omission of those forms is in the Eastern Judicial District of Michigan, in the judicial district where an IRS post-of-duty is located, or in the judicial district where the document was prepared.

  6. Title 31 USC §5332, Bulk Cash Smuggling into or out of the United States, was created by the USA Patriot Act, effective October 26, 2001. Criminal Investigation’s jurisdiction over this offense is limited to investigations where the underlying conduct falls under CI’s jurisdiction in money laundering offenses (18 USC §1956 and 18 USC §1957), Title 26 or Title 31 only. The USA Patriot Act made the act of smuggling in cash or other monetary instruments over $10,000, a criminal offense and authorized forfeiture of the cash or instruments of the smuggling.

  7. Failure to file and filing a false report are predicated on the existence of a transaction (or an aggregate of related transactions) which actually exceeds $10,000 thus triggering the duty to file; whereas acts of structuring may never trigger the reporting requirement because the individual transactions involved may never exceed the threshold amount. Transactions comprising an act of structuring constitute a single offense.

  8. Undercover operations involving possible violations of Title 31 may precede or operate concurrently with a grand jury investigation. It is not necessary to request jurisdiction from the Chief, CI, solely for the purpose of conducting the undercover operation. To protect the existence and confidentiality of the undercover operation, Title 31 jurisdiction should not be requested until the field is ready to proceed to the grand jury stage.

9.5.5.3.3  (11-04-2004)
Reports and Recordkeeping and Registration Required Under Title 31

  1. Information in the subsections below discusses Title 31 requirements for specific reports, recordkeeping, and registration.

9.5.5.3.3.1  (08-27-2007)
Reports Required by the Bank Secrecy Act - Title 31

  1. The following reports are required under Title 31.

    • Currency Transaction Report (CTR), (formerly Form 4789) FinCEN Form 104

    • Currency Transaction Report by Casinos (FinCEN Form 103)

    • Report of Foreign Bank and Financial Accounts (FBAR) (TD Form 90-22.1)

    • Report of International Transportation of Currency or Monetary Instruments (CMIR), (formerly Customs Form 4790), FinCEN Form 105

    • Suspicious Activity Report (SAR) Forms

9.5.5.3.3.1.1  (08-27-2007)
Currency Transaction Report (FinCEN Form 104)

  1. Title 31 CFR 103.22 requires that each financial institution file a CTR on each deposit, withdrawal, exchange of currency or other payment or transfer, by, through, or to such financial institution that involves a transaction in currency of more than $10,000. Title 31 CFR 103.27 requires that the CTR must be filed by the 15th calendar day after the day of the transaction with the IRS Detroit Computing Center, Attn: CTR, PO Box 33604, Detroit, MI 48232-5604, or with the local IRS office. Casinos must file a report for each currency transaction involving either cash in or cash out of more than $10,000. There is an exception for the US Postal Service, who does not have to file CTRs, for payments or transfers made solely in connection with the purchase of postage or philatelic products.

  2. Banks may exempt certain entities from CTR filings through the filing of a form TDF 90-22.53, Designation of Exempt Person, with the Detroit Computing Center. These designation forms are entered into the Currency Banking Retrieval System (CBRS) and can be queried by those with CBRS access. Banks also maintain a list of these exempt businesses. Further information relating to who qualifies for this designation is contained in Title 31 CFR 103.22.

9.5.5.3.3.1.2  (08-27-2007)
Currency Transaction Report by Casinos (FinCEN Form 103)

  1. Title 31 CFR 103.22(b)(2) requires each casino file a report of each transaction in currency, involving either cash in or cash out, of more than $10,000.

  2. Title 31 CFR 103.11(n)(5)(i) defines a casino as an organization duly licensed to do business in the United States as a casino or gambling casino with gross annual gaming revenues in excess of $1 million. This includes the principal headquarters or any branch or other place of business.

  3. Types of transactions in currency involving CASH-IN include but are not limited to (31 CFR 103.22(b)(2)(i)):

    1. purchases of casino chips, tokens and other gaming instruments

    2. deposit(s) (front money or safekeeping)

    3. payments in any form of credit including markers and counter checks

    4. bets of currency

    5. currency received by the casino for transmittal of funds through wire transfer for a customer

    6. purchases of casino checks

    7. exchanges of currency for currency including foreign currency

    8. bills inserted into electronic gaming devices

  4. Types of transactions in currency involving CASH-OUT include but are not limited to (31 CFR 103.22(b)(2)(ii)):

    1. redemption of casino chips, tokens, tickets, and other gaming instruments

    2. withdrawal(s) of deposit (front money)

    3. safekeeping withdrawals

    4. advances on any form of credit, including markers and counter checks

    5. payments on bets

    6. payments by a casino to a customer based on receipt of funds through wire transfer

    7. cashing of checks or other negotiable instruments

    8. currency exchanges, including foreign currency

    9. travel and complimentary expenses and gaming incentives

    10. payment for tournament, contests, and other promotions

  5. The report must be filed by the 15th day after the transaction date, with the IRS Detroit Computing Center, PO Box 32621, Detroit, MI 48232-5604 Attn: CTRC, or with the local IRS office.

  6. Casinos with gross annual gaming revenues of less than $1 million are subject to the reporting requirements of 26 USC §6050I, Report of Cash Payments Over $10,000 Received in a Trade or Business, Form 8300. Casinos with non-casino businesses, e.g., shops, restaurants, and hotels, are subject to the reporting requirements of 26 USC §6050I, regardless of the amount of annual gaming revenues.

  7. The Department of the Treasury allows Nevada casinos to file CTRs and related records with the Nevada Gaming Control Board, who in turn forwards the reports to the Detroit Computing Center. Effective July 1, 2007, Nevada casinos with gross annual gaming revenues of $10 million or more and "table games statistical win" of $2 million or more became subject to all applicable BSA requirements, including the requirement to file FinCEN Form 103, Currency Transaction Report by Casinos (CTRC). Currency Transaction Reports will no longer be filed with the Nevada Gaming Control Board.

9.5.5.3.3.1.3  (08-27-2007)
Report of Foreign Bank and Financial Accounts (FBAR) (TD Form 90–22.1)

  1. Title 31 CFR 103.24 requires that each United States person who has a financial interest in, or signature authority over, any financial accounts in a foreign country including bank, securities or other types of accounts, must report that relationship by filing an FBAR if the aggregate value of these financial accounts exceeds $10,000 at any time during the calender year. The deadline to file the FBAR with the Department of the Treasury for each calendar year is on or before June 30th of the following year. The term "United States person" means a citizen or resident of the United States, domestic partnership, domestic corporation, or a domestic estate or trust.

  2. A United States person is defined as a citizen or resident of the United States, a domestic partnership or corporation, or a domestic estate or trust.

  3. Persons with 25 or more foreign accounts need only note that fact on TD Form 90–22.1, and will be required to provide detailed information for each account when requested to do so.

  4. Persons required to file Federal income tax returns must also answer the question on the tax return form as to whether or not he/she has a financial interest in a foreign account.


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